The late US Supreme Court Justice Louis Brandeis famously said states are the “Laboratories of Democracy”. With that still being the case, Harrisburg policymakers would do well to heed how the current state of affairs is being assessed by other state governors — and in turn, change course by introducing pro-growth taxes during the upcoming budget – and regulatory reforms introduce negotiations.
Arkansas recently made headlines for securing a $3 billion investment from a leading steel company to build new, high-efficiency plants in the state. Asa Hutchinson, the state governor, announced the factories, which will provide six-figure jobs for 900 people, would be built “before you could even get permission to start construction in Pennsylvania.”
Governor Hutchinson’s taunt should be a wake-up call. Pennsylvania lost another congressional seat for the umpteenth straight year during the decade-long redistribution. Our state is stagnant in population; In fact, Keystone State is losing out to Southeast and Sunbelt states with better economic climates. Despite our significant natural resources, access to markets and world-class universities, too many young people leave their homes to work or start businesses elsewhere. It is time we took bold steps to turn the tide of this state.
We are pleased that Gov. Wolf and the Legislature are united on this point — House and Senate leaders, along with the Governor, have identified cutting the state’s onerous corporate tax rate as a priority for budget negotiations and legislation to cut the corporate tax rate already passed the house. We understand that some will warn that the state’s rapidly aging population will place a significant drain on public resources in the years to come. But encouraging additional business investment in the state means a firmer fiscal picture through increased business activity, more people working (and paying taxes), and a more vibrant civil life. That’s why we joined nearly 50 other state and local chambers last week in emphasizing that it’s time to significantly reduce the corporate tax rate.
A lower enterprise rate means a Pennsylvania more receptive to start-ups and entrepreneurs and a shift in manufacturing that is occurring as supply chains realign in the wake of a global inflationary crisis. As noted in the Chamber’s coalition letter, studies have shown that the benefits of CRF reduction go far beyond attracting new business and investment. Studies have shown that a lower CKD rate would increase government GDP, raise wages and home values, create family-supporting jobs, and attract and retain new talent.
But as Governor Hutchinson’s comments should make clear, competitive tax rates will not suffice if the time to the approval process is extended. That’s why our organization has supported thoughtful reforms that will provide state agencies with additional resources to review permits and reduce the time to process litigation. Too often, anti-growth environmentalists use the courts to stall the construction of new projects. Given that the state’s air and water quality regulations are among the most stringent in the country, such delaying tactics are misguided and will most likely have a net negative outcome should the outcome lead to the new facility being built in another country that doesn’t our commitment to management. Congress recognized that red tape must be cut to build the infrastructure needed for a modern economy when it included major permitting reforms in last year’s bipartisan infrastructure law; To boost Pennsylvania’s economy, the state legislature and governor must build on these state-level reforms.
The above trends of population loss and Pennsylvania’s mediocre economic attractiveness will not resolve themselves just because the pandemic appears to have receded. In each of the states that won a congressional seat through district re-election, more people are now working than before the pandemic. In contrast, Pennsylvania’s labor force is nearly 200,000 fewer. Many in our state have retired or taken advantage of remote work and gone elsewhere — which is a shame since many corners of this state are as scenic as anywhere in the country.
Another underestimated phenomenon of the pandemic is the number of newly founded companies. Despite the massive uncertainty brought on by the crisis, 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 these startups as the labor force continues to decline.
People are on the move; let us welcome them home and welcome them here. New companies are formed in record numbers; Let’s make sure they are created here. Supply chains are realigning; Let’s get them established in Keystone State.
Let’s make that happen in this year’s budget.
Gene Barr is President and CEO of the Pennsylvania Chamber of Business and Industry.