Corporate Welfare Is Rampant Throughout Governor Shapiro’s Proposed Budget

Harrisburg, Pa., March 7, 2024 — Gov. Josh Shapiro’s proposed 2024–25 budget funnels $1.49 billion of taxpayer money to corporate welfare programs that have repeatedly failed to improve Pennsylvania’s economic competitiveness, according to a new analysis from the Commonwealth Foundation.

The Shapiro administration’s latest budget plan allocates $892 million to business subsidy programs and another $600 million toward narrow tax credits despite the consistently poor return on investment these programs offer. An October 2023 review by the Pennsylvania Independent Fiscal Office found most of these tax credit initiatives return fewer than 25 cents for every dollar spent.

“Shapiro’s $1.49 billion corporate welfare plan doubles down on the same failed economic development schemes that have kept Pennsylvania’s economy anchored near the bottom of national rankings,” said Commonwealth Foundation Director of Policy Analysis Elizabeth Stelle. “The Commonwealth’s business climate is in shambles, leading our best and brightest to leave for better opportunities elsewhere and driving prospective businesses away from the state. We need to change course.”

Pennsylvania ranks 46th in economic performance and the fifth-worst state to find a job, according to recent analyses from the American Legislative Exchange Council and WalletHub. Pennsylvania’s uncompetitive tax and regulatory environment has driven a sustained outmigration of residents. Data from the U.S. Census Bureau shows that nearly 65,000 Pennsylvanians left for other states over the last two years.

Despite billions spent on targeted subsidies and tax incentives over the past decade, Pennsylvania recently lost major economic development projects, including a U.S. Steel mill and a Fairlife dairy plant. The Commonwealth Foundation analysis found that as corporate welfare spending increases, economic performance declines.

Rather than more piecemeal corporate giveaways, the Commonwealth Foundation recommends pursuing broad-based tax and regulatory reforms. Such reforms include accelerating the reduction of the oppressive corporate net income tax rate and lifting the state’s strict cap on deducting net operating losses—both keep Pennsylvania at a significant competitive disadvantage.

Stelle continued: “We need to break from the failed status quo and unleash our state’s economic potential. By cutting Pennsylvania’s corporate net income tax to 5.3 percent and slashing state regulations by 36 percent, we could create 180,000 jobs and make Pennsylvania a more attractive place to live, work, and invest.”

View the Commonwealth Foundation’s full fact sheet here.

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The Commonwealth Foundation turns free-market ideas into public policies, fostering prosperity for all Pennsylvanians.