Pennsylvania’s latest economic outlook shows a return to pre-pandemic benchmarks.
And, in some cases, employment figures surpass metrics measured before COVID-19, according to the Independent Fiscal Office (IFO).
Unemployment insurance (UI) claims, as the IFO’s latest monthly economic update shows, have returned to pre-COVID levels. Unemployment claims, payroll jobs and employment changes have all now surpassed pre-pandemic levels.
“If monthly job gains continue, then that would be a strong indicator that the economy has likely not entered into recession,” the IFO update noted. “However, the UI claims data show a 36.4% increase from the same month in the prior year, which may suggest UI claims are returning to pre-COVID levels.”
The pre-COVID average for monthly UI claims was 145,000. Over the last six months, claims have swelled from 67,000 to 146,000.
The labor force participation rate, which is the ratio of people working or looking for work of the total adult population, also increased slightly, from 61.6% to 61.7%.
Job openings, meanwhile, are much higher than the pre-pandemic average. November’s 410,000 job openings are up 45% over pre-pandemic levels.
While job openings and UI claims are up, the unemployment rate continued its decline. In December, unemployment fell to 3.9%, the lowest rate in decades.
Nationally, claims have fallen as job growth continues. Federal Reserve Chairman Jerome Powell has described the economy as having a “structural labor shortage,” with many job openings but fewer workers to fill them.
Most states collect a corporate income tax — and historically, Pennsylvania levies one of the highest rates.
That’s why lawmakers approved a plan in 2022 to cut it in half over the next decade.
A new report shows it’s still not enough, however, to bring Pennsylvania near the top of the leaderboard — the state won’t even crack the top 10.
The analysis from the Tax Foundation offers further perspective on Pennsylvania’s corporate net income tax (CNIT). The lowest CNITs are in states like North Carolina (2.5%), Missouri and Oklahoma (4%), and Colorado (4.55%).
The highest rate is in New Jersey (11.5%), followed by Minnesota (9.8%), Illinois (9.5%), Alaska (9.4%), and, as of now, Pennsylvania (8.99%).
Until last year, Pennsylvania was ranked second in the nation with a 9.99% rate. However, a budget deal struck last year between the General Assembly and former Gov. Tom Wolf means the CNIT will decrease incrementally until it hits 4.99% in 2031, as The Center Square previously reported.
If no states change their corporate taxes, Pennsylvania’s eventual rate would rank it as the 35th highest in the nation, behind Mississippi and South Carolina, both with a 5% rate.
Pennsylvania’s reliance on CNIT as a source of revenue however, lags other states, the report noted. It’s unclear how a lower rate will affect this dynamic going forward.
Corporate income taxes accounted for an average of just over 7% of state tax collections and 4% of state general revenue in FY 2021, according to the foundation.
Some states go without a corporate tax at all, such as Wyoming and South Dakota.
Nevada, Ohio, Texas, and Washington have no corporate tax, but levy a gross receipts tax instead. Others, such as Pennsylvania, Virginia, and West Virginia do not have a state gross receipts tax, but allow gross receipts taxes on the local level.
