The Estimated Impact of the Swann Tax Cuts

Executive Summary Republican gubernatorial candidate Lynn Swann has proposed a number of changes to state tax rates. This analysis focuses on four major components of that proposal—namely reductions in the tax rates for the Corporate Net Income Tax, the Personal Income Tax, the Corporate Stock and Franchise Tax, and the Inheritance Tax.

The Commonwealth Foundation has contracted with economists at the Beacon Hill Institute at Suffolk University in Boston, Massachusetts to build a Pennsylvania specific Computable General Equilibrium (CGE) economic modeling program—known as the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP)—in order to analyze the impact of potential tax increases or decreases on Pennsylvania producers, households, and government.

The model calculates the impact of tax changes on jobs, wage rates, investment, personal income, and disposable income, and can also separate the data into categories by income groups, industry sectors, and state government. This policy brief utilized the Pennsylvania State Tax Analysis Modeling Program to estimate the potential impact of Mr. Swann’s proposed tax cuts. Accordingly, the projected four-year impact of Republican gubernatorial candidate Lynn Swann’s proposed tax cuts will result in

• 18,238 additional jobs,
• nearly $4.3 billion in additional personal income,
• more than $4.8 billion in additional investment, and
• $876 more in disposable income for the average family of four.

Although state tax revenues will increase by 6.6% over the next four fiscal years, state government will receive $2.962 billion less in taxes than under current tax rates.