Federal tax reform is having a positive impact on working people throughout the country, including right here in Pennsylvania. From Pittsburgh to Philadelphia, companies have announced bonuses, wage increases, and enhanced retirement benefits for thousands of workers. They’ve also promised to donate hundreds of millions of dollars to charitable causes in the communities they serve.
At least 17 companies headquartered in the commonwealth have committed to increasing compensation for their employees. The number is even higher — 29 in total — when accounting for businesses with locations in the Keystone State.
Preliminary data from the Bureau of Economic Analysis (BEA) projects tax reform boosted wages and salaries by at least $30 billion in January alone. The BEA also estimates the Tax Cuts and Jobs Act will provide much-needed tax relief for families, reducing current personal taxes by $115.5 billion annually.
While dollars and cents are important, tax reform is about more than that. It’s also about improving the quality of life for every person working hard to provide for themselves and their families.
Ken Wilson, a project foreman in Western Pennsylvania, explains how federal tax cuts will help his family: “I think it’s great if somebody like me gets that kind of opportunity to have that kind of savings. It’ll go a long way throughout the year. With my daughter getting ready to graduate high school in a year, I’ve got to start thinking about the future for her.”
It’s this kind of personal impact that should drive lawmakers to learn from federal reform and overhaul the state tax code. Pennsylvania has one of the highest tax burdens in the country, and it is taking a toll on workers like Wilson — both through burdensome tax loads and through fewer job opportunities.
High taxes hinder the creation of new firms, reduce incomes, and help drive residents to lower-tax states, according to a Mercatus Center study. And Pennsylvania isn’t immune. From 2002-2016, Pennsylvania ranked 37th in job growth, 36th in personal income growth, and 42nd in population growth.
In contrast, states with relatively low tax burdens have enjoyed robust economic growth compared to their high-tax state counterparts. An appeal to common sense explains why.
When businesses keep more of their money, they have more to invest in their employees. These investments lead to higher wages and benefits, along with more jobs. Workers may also benefit through reduced tax rates on their own income, providing another boost to their budgets and the economy.
State government cannot tax and spend its way out of its looming fiscal challenges. The real solution is a pro-growth economic plan that makes the state an attractive place to live and work. In other words, it is time to reduce taxes and control state spending.
Yes, Pennsylvania can learn from federal tax reform, but we must also take other states’ experiences to heart.
In North Carolina, spending restraint coupled with tax reductions spurred economic growth and boosted personal incomes. In Kansas, though, lawmakers reduced taxes without corresponding spending reforms, which led to the serious budget challenges that now plague the state.
Kicking our overspending habit must go hand-in-hand with tax reform.
Too many communities across our state have been hollowed out by big government policies, leaving people to search for jobs elsewhere. To revitalize these areas and help people looking for a better life, lawmakers should dramatically reduce taxes, overhaul the regulatory environment, and control government spending.
These changes will boost economic growth and put the state back on solid ground. Harrisburg’s focus should be on removing government roadblocks preventing Pennsylvanians from creating, innovating, and serving each other. That’s how economic revitalization will begin.
(Bob Dick is a senior policy analyst for the Commonwealth Foundation, Pennsylvania’s free-market think tank.)
