Originally published in the Pennsylvania Capital-Star, June 29, 2022.
By Nick Pressley and Marc Stier
Every rumor we hear about the state budget negotiations tells us that a reduction in the corporate net income tax (CNIT) rate is possible. It is unclear whether that corporate tax cut also includes some of Gov. Tom Wolf’s “add-back” provisions, which would make multinational corporations that currently pay nothing pay something. It appears that Republicans continue to oppose closing the Delaware loophole by enacting combined reporting.
Every rumor we hear also says that raising the minimum wage may not be included because Republicans oppose it.
Are we talking about cutting corporate taxes because it is a good idea? And is raising the minimum wage less likely because it is a bad idea? I’ll come back to these questions below, but the short answers are “no” and “no.”
If they are not bad ideas, then is it hard to raise the minimum wage and easier to cut corporate taxes because the General Assembly reflects the will of the people? Again, the answer is “no.”
The Pennsylvania Budget and Policy Center commissioned Data for Progress to poll Pennsylvanians on these issues. The top-line results can be found here and they are striking.
First, there is overwhelming support (73 percent) for putting the minimum wage on a path to $15 per hour over four years and thereafter having a yearly cost of living increase (77 percent). Support is found across all regional and demographic groups.
Second, there is overwhelming opposition to cutting corporate taxes. Seventy percent of voters would like the state to increase taxes on billionaires and corporations; only 25 percent want to see them cut.
More than 78 percent of likely voters want to see the Delaware loophole closed so that multinational corporations can no longer hide their Pennsylvania profits from our Corporate Net Income Tax. And when asked whether some of the $12 billion’s worth of accumulated state surplus should be devoted to cutting taxes on corporations and the wealthy, only 2 percent said “yes,” Again, opposition to corporate tax cuts is found across all regional and demographic groups.
We will be posting polls results for each House and Senate district in the state over the next few days. That data will show that there is very little difference in the view of Democratic-leaning, competitive, and Republican-leaning districts.
Instituting corporate tax cuts without closing loopholes is a bad idea. We have long thought that some reduction in the CNIT rate, which at 9.99 percent is slightly higher than the national average of 7 percent, is justified. A small rate cut is fair to Pennsylvania-based C-corporations that pay at a far higher tax rate than S-corporations and pass-through entities whose profits are taxed at the lower personal income tax rate.
But we can only avoid deep losses in revenues and ensure that taxes are fair to Pennsylvania-based corporations if we require multinational corporations to pay at the same rate. The revenue loss that comes with corporate tax cuts is serious. A two-point reduction in the CNIT rate would cost the state at least $600 million in the first year it is fully in place. The losses would increase year after year.
And our recent report shows that a cut in the CNIT rate would generate relatively few jobs at the end of ten years and at a cost of well over $6 billion.
Raising the minimum wage is a good idea. Our analysis shows that raising the minimum wage to $15 by 2028 would benefit 1.5 million Pennsylvanians and add $5.3 billion to the wages of those workers, helping not only them but our economy and especially small businesses.
Most of those who benefit from raising the minimum wage are adults. They are women, disproportionately Black and brown, and are many of the essential workers we all relied on at the height of the pandemic.
As we have repeatedly demonstrated—and another recent study confirms—the cost of raising the minimum wage in reduced jobs is minimal or non-existent. And we have consistently shown that the criticisms of raising the minimum wage are mostly right-wing myths.
Despite a $15 minimum wage in New York City and inflation in the cost of many goods, “dozens of eateries across New York City sell pizza slices for $1,” and other restaurants have only raised their pizza prices by a small percentage.
So, if the policies don’t make sense and the people oppose them, why is the General Assembly contemplating a cut in the CNIT rate and not contemplating an increase in the minimum wage?
The answer should be obvious: because the Republicans that run the General Assembly, and a few Democrats as well, don’t care much about what the people of Pennsylvania think. They care far more about what the Chamber of Commerce, multinational corporations, and billionaires like Jeff Yass think.
But we can change that by paying attention to who is on our side and who is not.
Nick Pressley and Marc Stier respectively are the director of campaigns and the executive director of the Pennsylvania Budget & Policy Center, a progressive think-tank in Harrisburg.