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Governor calls CF’s job loss projections “ludicrous”

Commonwealth Foundation President and CEO Matthew J. Brouillette issued the following statement in response to Gov. Rendell’s critique of the Commonwealth Foundation’s economical modeling projections that Pennsylvania would have nearly 24,000 fewer jobs as a result of his proposed 16 percent hike in the state personal income tax:
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“Gov. Rendell’s critique of the Commonwealth Foundation’s projections of job losses under his proposed tax increase as ‘ludicrous’ is historically and economically ignorant.

The Governor’s campaign to raise taxes on working Pennsylvanians and small businesses ignores the basic laws of economics. By denying that citizens and businesses would respond to higher taxes, the Governor ignores the fact that people will have less money to spend, and small business owners will have fewer resources to invest in their enterprises.

What is truly ludicrous is that Gov. Rendell ignores the historical evidence that individuals and businesses respond to higher taxes by relocating to states or countries with lower tax rates. This is why Pennsylvania has been one of the largest out-migration states in the nation.

Gov. Rendell’s claim that Pennsylvania has the 2nd lowest income tax rate also distorts the facts in pursuit of his political agenda. Nine states have no income tax, or tax only dividends and interest. Most states have lower starting personal income tax rates, standard deductions, and additional tax credits or deductions. Thus, Pennsylvania ranks much higher in state income tax revenue collected per capita—28th highest, to be exact.

The Governor also conveniently ignores that Pennsylvania has local income taxes which are among the highest in the nation. In terms of state and local income taxes per person, Pennsylvania already ranks 16th highest. Most importantly, when the overall tax burden is considered—including income, corporate, sales and property taxes—Pennsylvania has the 11th highest state and local tax burden in the nation. That makes us already uncompetitive relative to other states, which is why we rank 34th in the nation in job growth under Gov. Rendell’s tenure. Raising or creating new taxes will only make things worse for Pennsylvania.”

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Thanks to The Commonwealth Foundation for this article

The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

PA already has 28th highest personal income tax collection per capita in the nation

HARRISBURG, PA — In response to Gov. Ed Rendell’s proposed 16% increase in the Personal Income Tax, the Commonwealth Foundation projected the economic impact of taking an additional $1.5 billion out of the private sector.

“Today Gov. Rendell revealed that he cares more about growing government than ensuring Pennsylvanians have good-paying jobs,” said Matthew Brouillette, president and CEO of the Commonwealth Foundation. “As every respected economist knows, a recession is the worst time to increase taxes. Doing so now would add thousands more Pennsylvanians to the unemployed ranks.”

Using the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP), an economic modeling program developed by the Beacon Hill Institute at Suffolk University, the Commonwealth Foundation projects that a 16% increase in the PIT (from a rate of 3.07% to 3.57%) would result in 23,960 fewer jobs next year.

Effect of Tax Changes on PA Jobs
Projected Jobs 2009-10
0.5% PIT Increase 1% PIT Increase 2% PIT Increase
Latest Estimates 5,156,122 5,156,122 5,156,122
With tax change 5,132,162 5,108,489 5,061,631
Effect of Tax Change -23,960 -47,633 -94,491
Sources: Governor’s Executive Budget, Beacon Hill Institute

“Rendell’s desire to extract more than $4.5 billion out of the economy over the next three years is a continuation of the same failed economic strategy of trying to tax and spend our way to prosperity,” said Brouillette. “Despite increasing state government spending by more than double the rate of inflation, Pennsylvania’s economic growth lags the national average and ranks among the worst in the nation.

Does Gov. Rendell really believe that more of the same will cure our economic ills?”

Brouillette said that Gov. Rendell’s argument that we can “afford” a personal income tax increase because we have the second lowest rate among the 43 states that impose such a tax is misleading. “According to the Tax Foundation, the same source cited by the Governor, Pennsylvania has the 28th highest personal income tax collection per capita,” he said. “In other words, while our rate may be amongst the lowest, the amount the state takes from working Pennsylvanians is far higher than the Governor suggests.”

The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

“Furthermore,” Brouillette said, “We need to look at the overall burden on taxpayers. Pennsylvanians shoulder the 11th highest state and local tax burden in the nation. So a PIT increase is hardly as innocuous as the Governor would suggest. In fact, it would be downright destructive to our ability to recover from this economic downturn.”