Tirzah Duren: Pennsylvania budget can build on tax reform boom | TribLIVE.com
Featured Commentary

Tirzah Duren: Pennsylvania budget can build on tax reform boom

1293174_web1_AP19126658935316
The Pennsylvania Capitol in Harrisburg

State lawmakers are heading into budget negotiations with wages rising, record-low unemployment and state revenues surpassing projections — an economic windfall largely due to federal tax reform. With all this great economic news, it would be easy to grow complacent.

But here’s the reality: Pennsylvania still lags other states. To attract the investment and job creators that will secure our future, we can — and must do better. Luckily, lawmakers have the blueprint they need to make our state competitive: Control spending and replicate federal tax reform in our own backyard.

The Tax Cuts and Jobs Act (TCJA) reduced taxes for 90% of Americans. It accomplished this by lowering the tax rate for everyone except those in the top two tax brackets and increasing the standard deduction.

In response, dozens of Pennsylvania employers announced raises, including increasing starting wages to $15 an hour. Other employers handed out bonuses, increased contributions to 401(k)s and made investments that created more jobs.

In Pennsylvania, wage growth reached 4% in 2018 and is expected to do the same in 2019 — which is benefiting workers at all levels. Wages are rising fastest among the lowest-paying jobs, according to data from the Federal Reserve Bank of Atlanta.

When its people prosper, the state does too. After federal tax reform, state revenue grew by 9.2%. As of April, state tax collections are $800 million above estimates.

Nationally, tax reform is expected to grow the economy by 1.7%. If these changes are made permanent, lower- and middle-income earners will continue to benefit.

While tax reform has helped spur Pennsylvania’s economic growth, we still lag the rest of the nation — and our residents continue moving to other, faster-growing states. This trend is pronounced among younger college graduates. From 2012 to 2017, the commonwealth lost more than 30,000 residents aged 18 to 34. That includes 36 college-educated individuals per day — a “brain drain” that illustrates our current approach of high taxes and overspending is shrinking our labor force and hamstringing economic growth.

Here’s the good news: Lowering tax rates and enacting state spending limits can reverse this trend.

Pennsylvania has the third- highest corporate net income tax in the country. Iowa and New Jersey levy a higher rate, but only on more profitable corporations and both states are scheduled to lower their top rate. In Pennsylvania, all corporations, which includes many small businesses, pay nearly 10%. Even Gov. Tom Wolf, who has supported 11 tax hikes in five years, proposed lowering the corporate rate to 5.99% by 2024.

Simplifying the sales tax would also be a big help. Our 6% state sales tax ranks 16th in the nation and compliance costs are high given complexity of what is and isn’t subject to tax. Applying a low-rate, uniform sales tax with fewer exemptions will lighten the tax burden for everyone.

Controlling spending is the other side of the tax reform coin. Absent spending limits, Pennsylvania has built up more than $10,000 in debt per person. That’s where the Taxpayer Protection Act (TPA) comes in.

The TPA holds government growth to the rate of inflation plus population change, allowing for spending growth but keeping it in line with taxpayers’ ability to pay for it. This simple restraint protects Pennsylvania families from unnecessary tax hikes and ensures long-term fiscal health.

Thankfully, many state lawmakers are on board with enforcing long-term fiscal discipline. The Senate Finance Committee recently passed a TPA bill, SB 116, and House lawmakers have introduced their own.

This budget season, let’s build on federal tax reform’s success while enacting commonsense spending limits. Then we’ll turn Pennsylvania back into a destination state for families and jobs creators.

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.