Why Harrisburg Matters

Sometimes, policy debates in the state Capitol can feel like Star Wars—happening “a long time ago, in a galaxy far, far away.” While you’re busy building your business, investing in your community, raising a family, and planning for the future, who has the time—or inclination—to think about what happens under the Capitol Dome?

But if you’ve ever filled your car with gas, owned a home, stopped at Starbucks for coffee, started a business, hired a worker, sent your child to public school, brought home a paycheck, bought an eBook, or downloaded a song from iTunes, that far-away galaxy has collided with your own.

Think about it. Your Starbucks latte carries a six percent sales tax. Your car’s gas is taxed at the highest rate in the nation. Your business must abide by multiple state regulations to avoid threat of shutdown. Wage regulations influence the cost of your workforce. Your property taxes help fund the state’s pension system. Your paycheck carries a 3.07 percent income tax. And as a result of budget negotiations last month, you now pay a sales tax on digital downloads.

Facing seemingly endless mandates and fees, it’s easy to feel powerless and resign yourself to the belief that this is simply “the way it is.”    

Thankfully, America’s entrepreneurs have never settled for the status quo. Instead, entrepreneurs and small business owners have innovated, created, developed, improved, and taken the proverbial bull by the horns to overcome obstacles.

Sadly, many of these obstacles come from government itself. If we want to create the best environment in Pennsylvania for businesses to launch, grow, and succeed, then we must work to ensure policies coming from Harrisburg are enabling growth, not working against it.

The first step is understanding the policies—both obvious and lesser known—that influence our state’s business environment.

For example, in 2015, Pennsylvania ranked 32nd in business tax climate, according to the non-partisan Tax Foundation. In other words, 31 states have a tax structure that’s more attractive to businesses. In fact, Pennsylvania has the second-highest corporate income tax rate in the nation, at 9.99 percent. Combined with the federal tax rate, it’s the second-highest in the world.

Beyond corporate taxes, Pennsylvania job creators pay personal income taxes, property taxes, sales taxes, and unemployment insurance taxes, to name just a few. No wonder one person migrated out of Pennsylvania every 12.5 minutes last year. That’s 41,600 people who found better opportunities to raise their families, find jobs, or start businesses in more welcoming states.

Certainly, taxes are necessary to keep government’s core functions running. But many state activities limit opportunity for businesses to grow and create jobs—and create the need for even higher taxes.

Through selective business subsidies, for example, the state directs hundreds of millions in tax dollars to “economic development” programs. To do this, the government must take money out of the private sector—including from businesses such as yours. 

Consider, too, Pennsylvania’s $63 billion public pension debt which amounts to $5,000 for every man, woman, and child in the state. The Commonwealth Foundation has been warning of the coming pension catastrophe for more than a decade. In that time, pension debt has skyrocketed 730 percent.

Years ago, private sector businesses embraced 401(k)-style retirement plans, recognizing the unsustainability of traditional pension plans. The state, though, has consistently balked at modernizing our archaic pension system, letting the problem grow by billions every year instead.

Pension payments are now the primary driver of property tax increases, which directly affect your ability to invest in your business.

But it’s not all about money. We all want to pass on to our children the same—even better—opportunities for a great education, a fulfilling career, and a happy life that we enjoyed.

The truth is that from West Chester to Norristown, state policy impacts lives—and businesses. The better we understand this, the better we can work together to ensure policies coming from Harrisburg allow the greatest opportunity for all Pennsylvanians to create a prosperous future for ourselves and our families.

Elizabeth Stelle is Director of Policy Analysis for the Commonwealth Foundation (CommonwealthFoundation.org), Pennsylvania’s free-market think tank.