LOVE YOUR MONEY: Pennsylvania scores poorly on spending and taxes among 50 states
Sunday, December 25, 2016
In the Fraser Institute’s annual Economic Freedom of North America report, Pennsylvania fared well, ranking 18th among the states. But on significant points like government spending and taxes, the Keystone State could do better.
Pennsylvania ranked 30th on government spending and 37th on income and payroll taxes as a percentage of personal income. On property taxes and other taxes, it was 29th.
“There’s a connection between high government spending and slower economic growth,” Elizabeth Stelle, director of policy analysis for the Harrisburg-based Commonwealth Foundation, told Watchdog.org. “If we want a vibrant economy, if we want people to be able to find jobs, if we want people to prosper, then this study shows we need to reduce government spending and we need to have a better tax structure.”
Economic Freedom of North America 2016
A TAXED NATION: Pennsylvania tied for 18th in the Fraser Institute’s analysis on economic freedom in the 50 states. Experts say it can improve on areas like government spending and taxes.
Dean Stansel, report co-author and associate professor at Southern Methodist University, told Watchdog.org that people consider these factors when moving to more business-friendly states like Florida and Texas, ranked second and third respectively.
For Pennsylvania, this outward migration resulted in the first population decline in 31 years. Between July 2015 and July 2016, Pennsylvania had a net loss of more than 7,600 people, according to new Census data.
“Even in a state like Pennsylvania that’s not at the bottom — more in the top half — you do see people fleeing for friendlier business environments,” Stansel said.
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He said Pennsylvania could learn from states like Florida and Texas, which stood out with above average growth of per-capita income and the absence of an income tax.
“While the income tax rate in Pennsylvania is fairly low, it’s still essentially higher than in Florida and Texas, as they don’t have an income tax. That tax is particularly burdensome to individuals,” he said. “It’s essentially a punishment or penalty for productivity.”
Stansel says these taxes could be a bigger burden on the local level, especially in heavily-populated areas like Philadelphia and Pittsburgh. “Some of the reforms that are really needed are local-level reforms,” he said.
Pennsylvania’s ballooning pension costs have not gone unnoticed either. The state ranked 38th for insurance and retirement payments as a percentage of personal income. Multiple attempts at reform failed in the state Legislature, most recently in October. Stansel and Stelle agree that addressing pensions is one place to start to address future state budgets.
Stelle said pension costs impact the property tax ranking too. “Our pension crisis is really fueling a lot of the property tax increases that we’re seeing across the state. It’s squeezing school budgets,” she said.
Compared to other states, Pennsylvania has a low percentage of government workers in the total workforce, but the density of union membership among employees remains high. Stelle says the biggest concern is the lack of transparency in contracts Democratic Gov. Tom Wolf makes with state employee unions.