HARRISBURG — Reducing consumer costs and growing the state’s economy will require significant changes to Commonwealth tax and regulatory policies, members of the House Majority Policy Committee said on Tuesday.
In the last of four inflation hearings, the committee heard from tax experts and employer advocates about long-term solutions to rising costs and how best to stimulate investment and create growth in the Commonwealth.
“Federal policies are largely responsible for historic inflation, but there are many things we can do to lessen the impact on our families and employers here in Pennsylvania and to strengthen our economy over the long term,” said Rep. Martin Causer, R.-Turtlepoint, chairman of the committee. “While some in the state government would rather do nothing but blame inflation on ‘corporate greed’, we are looking for real solutions to help today and well into our future.”
Specific suggestions repeated at the hearing included reducing net corporate income tax by 9.99%, which is the second highest in the country; increase the amount of operating losses that can be set off against tax debts; reform taxes affecting small businesses; addressing regulatory hurdles, including tort reform, professional licensing restrictions, tort reforms, partisan judicial elections, and the state liquor monopoly; increase home energy production; and expanding the workforce by improving workforce development education and training, as well as eliminating policies that have discouraged many people from returning to work.
“Structural tax reforms will help the state’s economy meet inflationary demand and continue to generate economic benefits after the inflationary period ends,” said Timothy Vermeer, senior policy analyst at the Tax Foundation. “Structural reform is also the preventive measure needed to protect the Commonwealth against the negative effects of a recession.”
Alex Halper, director of government affairs for the Pennsylvania Chamber of Commerce and Industry, agreed. “For both small and large businesses, reducing the tax burden on employers can spur economic growth, raise wages and create family-supporting jobs. It allows greater reinvestment in equipment, production, materials and people; in other words, increase supply and reduce inflation,” he said.
Warren Hudak, president of Hudak and Company, a small business accounting firm based in central Pennsylvania, lamented the impact of current tax policies on his clients and other small employers in the state.
“State tax policy is a critical tool that can be used to attract growth, inspire innovation, and encourage businesses to invest in a future with greater economic opportunity across the state. Unfortunately, the system onerous Commonwealth tax continues to hamper the competitiveness of businesses located here,” he said. “Let me be clear. Small businesses don’t ask or want handouts. They want a level playing field and the ability to operate and grow their business with minimal government interference.
Joseph Bishop-Henchman, executive vice-president of the National Taxpayers Union Foundation and associate fellow at the Cato Institute, encouraged lawmakers to see the opportunity they have to make a difference in planning for the future of the Commonwealth.
“Pennsylvania’s future growth will come from small local businesses growing into big businesses, innovation beating established competitors in other states and countries, and doing things better or cheaper than anyone else in the world,” he said. “The creative, enterprising people who will make this a reality are here, now, in the state. They are in your neighborhoods and your cities. The question is, will they stay? Will they get investment when they need it? Will they hit a wall of obstacles, regulations, and taxes, or will they overcome them and be able to grow?Will they pass their businesses on to their children or move with them out of state And when similar enterprising people in other places think where will they go to grow up, what will make them choose Pennsylvania?”
Witnesses also said they did not support the Wolf administration’s proposal to send $2,000 checks to most Pennsylvania taxpayers.
David N. Taylor, President and CEO of the Pennsylvania Manufacturers’ Association, said, “Payments like this will only make the inflation problem worse, because inflation is fueled by too many dollars to too few goods.” He also stressed the importance of the government staying out of the wage market and instead helping workers acquire the skills needed to fill the thousands of well-paying, subsistence manufacturing jobs that are open. “Building the workforce and helping people find jobs would reduce inflationary pressures that are compounded by our current labor shortage,” he said.
Taylor also stressed the need to produce domestic energy and withdraw the Commonwealth from the Regional Greenhouse Gas Initiative (RGGI). “Wolf’s long-standing threat to impose an additional new tax on natural gas production has made our investment environment uncertain, which has discouraged further investment. Pennsylvania must embrace a pro-growth, pro-production, and pro-deployment agenda for home energy that will benefit employers, workers, and consumers.