The late US Supreme Court Justice Louis Brandeis has called states the “laboratories of democracy”. That still being the case, Harrisburg policymakers would do well to note how the current situation is being rated by other state governors — and, in turn, chart a new course by enacting growth-friendly tax and regulatory reform. in the next budget. negotiations.
Arkansas recently made headlines for securing a $3 billion investment from a major steel company to build new, highly efficient plants in the state. Asa Hutchinson, the state’s governor, boasted that the factories, which will support 900 six-figure paying jobs, would be built”even before they could get a permit to start construction in Pennsylvania.”
Governor Hutchinson’s taunt should be a wake-up call. Pennsylvania lost another congressional seat in the 10-year redistricting for the umpteenth time in a row. Our state is stagnating in population; in fact, the Keystone State is losing out to Southeast and Sunbelt states with better economic climates. Despite our vast natural resources, access to markets and world-class universities, too many young people are leaving home to work or start businesses elsewhere. It is time for us to take bold action to turn this state around.
We are pleased to see Governor Wolf and the Legislature agree on this – House and Senate leaders, as well as the Governor, have identified reducing the state’s onerous corporate tax rate as a priority for budget negotiations, and legislation to reduce corporate net income tax has already passed the House. We understand that some might warn that the state’s rapidly aging population will put a significant strain on public resources in the years to come. But encouraging additional business investment in the state means a stronger fiscal position through increased business activity, more people working (and paying taxes), and a more vibrant civic life. That’s why we joined nearly 50 other state and local chambers last week in stressing that it’s time to significantly reduce the corporate tax rate.
A lower business rate means a more welcoming Pennsylvania for start-ups and entrepreneurs, and continued manufacturing relocation as supply chains realign in the wake of a global inflationary crisis. As noted in the Chambers coalition letter, studies have shown that the benefits of lowering the CNI go far beyond attracting new business and investment. Studies have shown that a lower CNI rate would increase the state’s GDP, increase wages and home values, create jobs to support the family, and attract and retain new talent.
But as Governor Hutchinson’s comments should make clear, competitive tax rates aren’t enough if the time to obtain permits is extended. That’s why our organization has supported thoughtful reforms that provide additional resources to state agencies to review permits and reduce the time it takes to resolve disputes. Too often, anti-growth environmentalists use the courts to block the construction of new projects. Since the state’s air and water quality regulations are among the strictest in the nation, such delay tactics are misguided and most likely negative overall, if at all. results in the new facility being built in another country that does not share our commitment to stewardship. Congress understood that red tape needed to be cut in order to build the infrastructure needed for a modern economy when it included major licensing reforms in last year’s bipartisan infrastructure bill. Moving Pennsylvania’s economy will require the state legislature and governor to build on these state-level reforms.
The aforementioned trends in Pennsylvania’s population loss and average economic attractiveness are not going to resolve themselves simply because the pandemic appears to have receded. Each of the states that won a congressional seat in the redistricting has more people working today than before the pandemic. In contrast, Pennsylvania’s labor force is nearly 200,000 lower. Many in our state have retired or taken advantage of remote work and gone elsewhere — which is a shame, given that many corners of this state are as scenic as anywhere in this entire country.
Another little-known phenomenon of the pandemic is the number of new businesses created. Despite the enormous uncertainty the crisis has presented, a record 5.4 million Americans started a business in 2021, according to census data. But it’s clear that Pennsylvania has lost a good chunk of those startups, given the continued decline in the labor force.
People are on the move; let’s welcome them home and let’s welcome them here. New businesses are being created in record numbers; let’s make sure they’re created here. Supply chains are realigning; let’s make sure they find a foothold in the Keystone State.
Let’s make that happen in this year’s budget.
Gene Barr is President and CEO of the Pennsylvania Chamber of Commerce and Industry.