PIT Increase Would Cost Thousands of PA Jobs

Member Group : Commonwealth Foundation

NEWS RELEASE from the Commonwealth Foundation

New CF analysis projects 48,000 jobs lost from 1% increase in state income tax

HARRISBURG, PA — A new economic analysis from the Commonwealth Foundation reveals that a proposed increase in Pennsylvania’s Personal Income Tax (PIT) would result in the loss of tens of thousands of private sector jobs in the Keystone State.

"While Governor Rendell and those who benefit from higher taxes are busy lobbying for a tax increase, Pennsylvania’s economy continues to sputter," said Matt Brouillette, President and CEO of the Commonwealth Foundation. "As every economist knows, a recession is the worst time to increase taxes, and doing so now would add thousands more Pennsylvanians to the ranks of the unemployed."

Effect of Tax Changes on PA Jobs
Projected Jobs 2009-10
1% Increase 2% Increase
Latest Estimates 5,156,122 5,156,122
With tax change 5,108,489 5,061,631
Effect of Tax Change -47,633 -94,491
Sources: Governor’s Executive Budget, Beacon Hill Institute

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 1-percentage point increase in the PIT (from the current rate of 3.07%) would result in a net loss of 47,633 jobs next year. A 2-percentage point PIT increase would cost Pennsylvania 94,491 jobs. These job losses are on top of the jobs Pennsylvania has already lost and is continuing to lose in the economic downturn.

"The failure of the Rendell, Bush, and Obama agendas to stimulate jobs with higher levels of government spending is evident," noted Brouillette. "The only thing they have ‘stimulated’ is government. Tax increases will harm our economic recovery as Harrisburg politically allocates spending rather than allowing the private sector to spend, invest, and save in the most productive manner."

Pennsylvania Job Growth
In thousands, through April 2009, Not Seasonally Adjusted
Since Start of Recession (Dec 2007) Since April 2008
Number Percent Number Percent
Private Sector -216,600 -4.2% -170,900 -3.4%
Government Jobs 13,500 1.8% 6,400 0.8%
Federal Government 3,400 3.3% 3,700 3.6%
State Government 4,800 3.0% -200 -0.1%
Local Government 5,300 1.1% 2,900 0.6%
Source: Bureau of Labor Statistics

While President Obama and Governor Rendell claimed the economic stimulus would "create or retain" 130,000 jobs in Pennsylvania, the state has only lost jobs since passage of the stimulus legislation, and unemployment rates are higher today than the Obama administration claimed they would be with passing the stimulus bill. In fact, Pennsylvania has lost 217,000 private sector jobs since the start of the current recession, while adding 13,500 government employees.

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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.

CONTACT: Matthew J. Brouillette or Joe Sterns at 717.671.1901

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