STATEMENT: On the Tax Study Released by the PA Chamber of Business and Industry

Marc Stier |

This press release from September of 2018 includes a statement from PBPC director Marc Stier on the study “Pennsylvania: A 21st Century Tax Code for the Commonwealth,” released by the Pennsylvania Chamber of Business and Industry.

HARRISBURG — The Pennsylvania Budget and Policy Center released the following statement from director Marc Stier on the study, “Pennsylvania: A 21st Century Tax Code for the Commonwealth,” released today by the Pennsylvania Chamber of Business and Industry:

“The Chamber of Commerce announced today a tax proposal for our state that is the Pennsylvania equivalent of Trump’s federal tax plan. It would put more of the tax burden on working- and middle-class Pennsylvanians while reducing taxes for the rich and corporations. And it will make it harder to balance our budget in the future.

“While there are a few elements of the plan we think make sense, the entire plan rests on a fundamental confusion between a tax system that is “business-friendly” and a tax system that is “friendly to rich people including the owners of large corporations and those who have inherited wealth.” A business-friendly tax policy would be one that reduces the burden of taxation on the working class and middle-class people who drive our economy forward by purchasing what businesses produce. And it would ask the rich and corporations to pay their fair share so that we can invest in local communities and help small and medium-sized businesses thrive. A business-friendly policy would also raise the minimum wage in order to drive up consumption.

“Instead, the Chamber’s plan would make Pennsylvania’s upside-down tax system, in which the top 1% pay at one-third the rate of the bottom 20% and half the rate of the median taxpayer, even more unequal. It would

  • reduce corporate taxes, without closing the Delaware loophole that allows 74% of the corporations that operate in Pennsylvania to pay no corporate taxes;
  • raise taxes on seniors by $3.4 billion annually by ending the exemption of retirement income from taxation; and
  • broaden the base of the sales tax in ways that would increase the burden for working people and the middle class by including clothing, groceries, nonprescription drugs, medical services, and motor fuels, while still excluding some goods and services purchased mainly by those with higher incomes and while failing to include a low-income sales tax credit.

“At a time when incomes for the top 1% are rising rapidly while they are stagnant for everyone else, this tax plan is not just morally flawed, but dangerous in practice. If Pennsylvania reduces taxes on those whose incomes are growing while increasing taxes on those whose incomes are stagnant, the predictable result is a revenue shortfall.

“What is extraordinary about the Chamber of Commerce plan, and the report that it is based on, is that nowhere does it acknowledge that Pennsylvania has already radically reduced the share of tax revenue that comes from corporate income taxes, from 30% in 1972 to 20% in 2006 to 15% in the current fiscal year. The corporate tax cuts in the last 15 years alone cost the state about $4 billion in revenues each year. Meanwhile, there is no evidence that these corporate tax cuts have led to any economic growth and job creation.

“What clearly does lead to economic growth and job creation is raising the standard of living of the working people so that they can buy more. Every state around Pennsylvania has increased its minimum wage while ours remains stuck. Pennsylvania real wages in food services—the portion of the economy with a concentration of low-wage workers—grew between 2012 and 2016 by just 5% while across the region they grew by an average 7.8%. Meanwhile, employment growth in the region rose by 12% during this period while it was only 6.8% in Pennsylvania.

“This is a flawed plan, rooted in flawed economic theory, crafted without regard to the needs of everyday Pennsylvanians.”