The Taxpayer Protection Act

Unrestrained Growth in Government Spending is Burdening Taxpayers

• Total Pennsylvania state government spending has consistently outpaced the growth of personal income.
• From 1970 to 2014, the state operating budget grew as a percentage of Pennsylvanians’ personal income from 8.8% to 11.4%.
• Total state spending will have increased by approximately $13,800 per family of four (adjusted for inflation) from 1970 through 2015.
• Given the burden of government spending, state and local taxes now cost Pennsylvanians $4,374 per person, equaling 10.3% of resident’s total income. Pennsylvania currently has the 10^th highest state and local tax burden in the nation, up from 25^th in 1991.

Government Growth has Hampered Pennsylvania’s Economy

• Despite the dramatic growth in state government spending, Pennsylvania ranks among the worst states in key economic performance indicators.
• From 1970-2013, Pennsylvania ranked 49^th in job growth, 48^th in population growth, and 45^th in personal income growth.
• As Pennsylvania rapidly increased spending from 2000 to 2010, Pennsylvania’s private sector lost 103,700 jobs, while government employment grew by 33,400.
• Between 2010 and 2014—a period when General Fund spending grew less than inflation and population—Pennsylvania added 133,500 private sector jobs.
• According to IRS data, Pennsylvania lost a net 86,205 taxpayers to other states from 2000 to 2011.
• This out-migration resulted in a net loss of more than $4.7 billion in household income.

The Solution: The Taxpayer Protection Act (TPA)

The Taxpayer Protection Act would pave the way for the following reforms: 

Limit future growth in state and local government spending.

• Government spending increases would be limited to the rate of inflation plus population growth.

Prioritization of spending.

• Spending restraints would allow lawmakers to determine how to best allocate taxpayer dollars.

Ensure a prudent Rainy Day Fund.

• 25% of taxes collected above estimated spending levels would be placed into a Rainy Day Fund that could be used to balance the budget during years when revenue growth does not meet projections.

Provide tax relief for families.

• 25% of all excess state tax revenues would be used to reduce Personal Income Tax rates. 

The TPA Allows for Reasonable Increases in Government Services

• A spending limit only slows the growth in spending; it does not mandate any cuts.  
• Increases should be tied to an increase in prices (inflation) and the number of people served (population growth).
• The TPA is not a hard cap, allowing lawmakers to exceed the limit with a supermajority vote.

The Taxpayer Protection Act Prepares Pennsylvania for Recessions

• Prior to 2011-12, Pennsylvania’s total operating budget had increased for more than 40 consecutive years.
• The TPA would require responsible budgets with sustainable levels of growth in both good economic times and bad, avoiding budgets that have resulted in the deficits of recent years.
• The TPA would require lawmakers to set money aside in a Rainy Day Fund to prepare for declines in revenue.

Spending Limits Should Encompass all Government Spending

• State budget discussions tend to focus only on the General Fund, which represents less than half of all state spending. Pennsylvania’s total state operating budget is projected to be nearly $71.8 billion.
• Since 1970, General Fund spending has grown nearly 90% in inflation-adjusted dollars. In contrast, spending from “Other State Funds” ballooned by an estimated 677%.
• Total state spending increased by $33.8 billion since 2000.Under the TPA index, however, total state spending could have increased by $17.8 billion, which would have saved each family of four an additional $4,476 this year.