HARRISBURG, PA — In response to Gov. Ed Rendell’s proposed 16% increase in the Personal Income Tax, the Commonwealth Foundation projected the economic impact of taking an additional $1.5 billion out of the private sector.
“Today Gov. Rendell revealed that he cares more about growing government than ensuring Pennsylvanians have good-paying jobs,” said Matthew Brouillette, president and CEO of the Commonwealth Foundation. “As every respected economist knows, a recession is the worst time to increase taxes. Doing so now would add thousands more Pennsylvanians to the unemployed ranks.”
Using the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP), an economic modeling program developed by the Beacon Hill Institute at Suffolk University, the Commonwealth Foundation projects that a 16% increase in the PIT (from a rate of 3.07% to 3.57%) would result in 23,960 fewer jobs next year.
| Effect of Tax Changes on PA Jobs | |||
| Projected Jobs 2009-10 | |||
| 0.5% PIT Increase | 1% PIT Increase | 2% PIT Increase | |
| Latest Estimates | 5,156,122 | 5,156,122 | 5,156,122 |
| With tax change | 5,132,162 | 5,108,489 | 5,061,631 |
| Effect of Tax Change | -23,960 | -47,633 | -94,491 |
| Sources: Governor's Executive Budget, Beacon Hill Institute | |||
“Rendell’s desire to extract more than $4.5 billion out of the economy over the next three years is a continuation of the same failed economic strategy of trying to tax and spend our way to prosperity,” said Brouillette. “Despite increasing state government spending by more than double the rate of inflation, Pennsylvania’s economic growth lags the national average and ranks among the worst in the nation.
Does Gov. Rendell really believe that more of the same will cure our economic ills?”
Brouillette said that Gov. Rendell’s argument that we can “afford” a personal income tax increase because we have the second lowest rate among the 43 states that impose such a tax is misleading. “According to the Tax Foundation, the same source cited by the Governor, Pennsylvania has the 28th highest personal income tax collection per capita,” he said. “In other words, while our rate may be amongst the lowest, the amount the state takes from working Pennsylvanians is far higher than the Governor suggests.”
“Furthermore,” Brouillette said, “We need to look at the overall burden on taxpayers. Pennsylvanians shoulder the 11th highest state and local tax burden in the nation. So a PIT increase is hardly as innocuous as the Governor would suggest. In fact, it would be downright destructive to our ability to recover from this economic downturn.”
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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.