Going the Distance for Business Competitiveness
Rosie Ruiz won the Boston Marathon in 1980, shattering the fastest female time record and had hardly broken a sweat when she crossed the finish line. Ms. Ruiz was stripped of her title just eight days later when officials discovered she rode the subway to the finish line.
Similarly, in the grueling marathon that has been the phase-out of Pennsylvania’s Capital Stock and Franchise Tax (CSFT), Governor Tom Wolf has taken one out of the Rosie Ruiz playbook. In reality, all we needed Governor Wolf to do was… nothing. Under existing law, the tax was scheduled to reach a rate of zero and be repealed on January 1, 2016; he simply showed up at the finish line and is now trying to take the glory.
Eliminating this corrosive, job-killing tax is a marathon I’ve been running for more than 15 years and the Pennsylvania Manufacturers’ Association has been unwavering in our determination to see it gone. Until January 1, 2016, Pennsylvania was one of only two states that taxed both business earnings and assets regardless of profitability. Because the CSFT was levied on business assets, it discouraged growth and expansion that would have surely propelled our economy forward. The original plan for a ten-year phase out under Governor Tom Ridge was extended under each gubernatorial administration that followed, resulting in overpayments of more than $7 billion – business earnings that weren’t reinvested in the private sector for job creation, benefit enhancements, and operational expansions.
At the conclusion of the 1980 Boston Marathon Ms. Ruiz was asked about her split times throughout the race. She quietly responded, "What’s an interval?" Though she remained adamant that she finished the race, her complete lack of understanding of the process did her in.
Similarly, in one breath Governor Wolf declares the CSFT an "unfair tax on business." However, in the next breath he proposes the single largest spending increase in Pennsylvania’s history – all at the expense of the productive sector of our economy through $5 billion in higher taxes.
Last March, Governor Wolf proposed a budget that included a nine percent spending increase. On the table was a $31.6 billion budget with big-government spending increases across the board, but with no new accountability. Throughout this budget battle, we heard it all – increased personal income taxes (effective tax rate for Pennsylvania small businesses), increased and expanded sales taxes (businesses pay 40 percent of all sales taxes), taxing out-of-state business activity, retroactively reducing the deductible amount of losses a business can claim, and the list goes on. It’s clear that if the Wolf administration was asked about business competitiveness, their response may have been similar to, "What’s an interval?"
Those who should be commended are the fiscal conservatives in the General Assembly who continue to hold the line on frivolous spending and increased taxation. Pennsylvania already ranks 39th out of 50 when it comes to WalletHub’s "Best and Worst States to Be a Taxpayer", 39th and falling in economic performance in the "Rich States, Poor States" competitiveness rankings, and 34th in the Tax Foundation’s "Business Tax Climate Index." Those legislators who have fought courageously for the taxpayers of Pennsylvania understand that if we could tax ourselves into prosperity it would have happened already.
It should have been over on January 1, 2009, but the good news is that the CSFT is finally off the books, gone forever. Remember, though, that this has been a 16-year marathon, one at which Governor Wolf simply showed up at the finish line. Worse yet, by proposing $5 billion in higher taxes and spending, Governor Wolf has shown that he just doesn’t understand how to improve Pennsylvania’s economic competitiveness.
David N. Taylor is President of the Pennsylvania Manufacturers’ Association (PMA), a statewide trade organization representing the interests of manufacturers in the state’s public policy process since 1909. www.pamanufacrturers.org