Pennsylvania’s “Great” Economy

Pennsylvania’s economy is the most diverse in Ameri- ca. With the release of the latest Bloomberg Economic Diversity Index, Pennsylvania has surpassed both Colorado and Texas to claim the top spot. The benefit of a diverse economy is that the state is less vulnerable to market fluctuations in a particular industry. The variety of businesses alone, however, is not an indicator of economic health.

Pennsylvania is ranked an unimpressive 34th for Business Tax Climate according to the Tax Foundation, experienced below-average personal income growth last year, and ranked 45th on WalletHub’s list of best states in which to start a business. The variety of businesses in Pennsylvania manage to function despite the state’s business environment, not because of it.

Currently, Pennsylvania is sending strong messages about the businesses they do and do not want. Two prime examples are agriculture and natural resource extraction—in the form of mining, quarrying, and oil and gas extraction. In 2018, Pennsylvania’s resource extraction–related industries contributed five times more to the state’s GDP than agriculture-related industries. Its reward was politicians lining up to burden oil and natural gas extraction with a severance tax while simultaneously forking out $24 million in subsi- dies to the agriculture industry.

One of the best ways to encourage a diverse economy is to stop favoring one business at the expense of another through tax incentives or subsidies. That is exactly what corporate welfare does, and the state is set to spend over $700 million on such programs this year. Despite the programs being a demonstrable fail- ure, Pennsylvania continues to give certain businesses unfair advantages.

Cutting these programs would make the climate more competitive for businesses; using the savings to lower Pennsylvania’s Corporate Net Income Tax (CNIT)— the third-highest in the country—would be even better. In 2019, the corporate welfare savings could decrease the CNIT by over 2 percentage points to 7.88%—ac- cording to August revenue estimates—while remaining budget neutral.

Having a diverse economy is great. More important than that, however, is having an economy that provides well-paying jobs and opportunity to the people of Penn- sylvania. This is accomplished through competitive taxes and ending government favoritism of certain industries.