Penn’s Woods are darker and deeper in red ink than ever before thanks to the tax-borrow-and-spend agenda of the Rendell Administration and some General Assembly members who failed to put Pennsylvania back on a path to prosperity. To add insult to injury last month, the U.S. Census Bureau announced that Pennsylvania would lose another Congressional seat in 2012 due to stagnant population growth.
Over the past eight years, Gov. Rendell increased the state operating budget by $21 billion, or 45 percent, leaving an estimated $5 billion deficit for his successor. His unchecked borrowing has tripled budgeted interest payments, while increasing debt held by state agencies, like the Turnpike Commission, by 93 percent. Today, every Pennsylvania taxpayer owes almost $10,000 in state and local government debt.
With that kind of legacy, it’s no wonder Pennsylvania experienced a net loss of 38,000 taxpayers in state-to-state moves from 2003-2008, taking with them $2.1 billion in income. According to IRS data, Florida, Virginia, North Carolina, and Delaware-states with lower tax burdens and more economic freedom-are the most popular destinations for Pennsylvania expatriates.
Gov. Rendell has doled out billions of tax dollars in the name of economic development to bribe businesses to “create jobs.” Yet, since Gov. Rendell took office, Pennsylvania lost a net 5,500 jobs—including almost 22,000 private sector jobs lost while government jobs grew by more than 16,000. Despite press release promises, these “corporate welfare” handouts to companies like Boscov’s—which received $35 million in 2009—have hindered, rather than helped, job growth in the commonwealth.
One common target of these “economic development” schemes was alternative energy companies, who have benefited from $1 billion in renewable energy grants, tax breaks, and loans, but only created 8,300 “green” jobs, costing taxpayers over $120,000 per job. But subsidies and mandates to create green jobs result in a net loss, destroying jobs of other colors.
Governor Tom Corbett faces a tough road ahead fixing the mess Gov. Rendell will leave behind. Yet, there are many opportunities to return fiscal responsibility, economic freedom and in time, people to Pennsylvania.
For starters, Corbett should end corporate welfare to politically connected companies—Pennsylvania is the second highest spending state on so-called economic development grants-and focus on improving the overall business climate. The first step is balancing a budget without new taxes, and eventually lowering the state’s tax burden, currently the 11th highest in the nation.
A top priority for the new administration should be limiting lawsuit abuse; Pennsylvania’s ability to control tort costs is pitiful, 46th out of the 50 states. The commonwealth is a breeding ground for jackpot justice. Defendants are held financially responsible based on their wealth, not their involvement. Uncapped punitive damages and skyrocketing insurance premiums are shutting down businesses and discouraging professionals from practicing.
Corbett should also work to repeal Pennsylvania’s prevailing wage mandate. Prevailing wage laws inflate the cost of government construction contracts by upward of 30 percent, forcing school districts and municipalities to pay higher wages than those paid by the private sector for the same job.
Ending the state’s monopoly of mediocrity under full control over alcohol sales will attract new businesses and additional tax revenue streams to Pennsylvania. Privatizing the state-run system will also bring competition into the market, providing savings for customers, and end the border bleed of residents crossing into New Jersey, Delaware, and Ohio for better selection and lower prices.
Finally, Corbett should protect the Marcellus Shale golden goose from short-sighted grabs to garner more state revenue through a natural gas tax or fee. The industry has stimulated the economy, saving family farms and putting tens of thousands of Pennsylvanians back to work. It is clear that politics and the desire for more revenue are driving calls for a severance tax.
It’s only fitting that tax-borrow-and-spend Gov. Rendell is leaving taxpayers a parting gift of $400 million in new bonded debt, but Gov. Corbett has the opportunity to leave a very different legacy. Instead of undermining growth by bribing businesses to come or stay, reforming the business climate to make the state attractive to all companies, along with eliminating lawsuit abuse, repealing prevailing wage laws, privatizing alcohol sales and allowing Marcellus Shale development will ensure Corbett’s term is one of prosperity for current and future generations of Pennsylvanians.
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Katrina Currie is a Research Associate and Nathan A. Benefield is Director of Policy Research with the Commonwealth Foundation (CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.