{"id":8580,"date":"2018-03-21T00:07:24","date_gmt":"2018-03-21T04:07:24","guid":{"rendered":"http:\/\/marcstier.com\/blog2\/?p=8580"},"modified":"2020-12-21T00:15:53","modified_gmt":"2020-12-21T05:15:53","slug":"tax-cuts-for-wealthy-wont-bring-prosperity-to-pa","status":"publish","type":"post","link":"https:\/\/marcstier.com\/blog2\/?p=8580","title":{"rendered":"Tax cuts for wealthy won’t bring prosperity to PA"},"content":{"rendered":"\n

Originally published in Public Opinion, March 21, 2018<\/a><\/em><\/p>\n\n\n\n

In the aftermath of the Trump-GOP tax cut enacted at the end of the last year, some legislators and advocates are calling for Pennsylvania to\u00a0also\u00a0cut tax rates for both individuals and corporations in the hopes of spurring economic growth and job creation.\u00a0\u00a0<\/p>\n\n\n\n

It is hard to think of a worse idea for our political community, not only because it is unfair, but because it has been tried and failed again and again.  <\/p>\n\n\n\n

Pennsylvania has one of the most unequal tax systems in the country. Low-income Pennsylvanians pay 12%\u00a0of their income in state and local taxes while middle-income Pennsylvanians pay 10%. But\u00a0those\u00a0with incomes in the top 5% pay only 6.8% of their income taxes while the top 1% pay only 4.2%. With a tax system\u00a0this\u00a0unfair, why should we emulate a federal tax cut that mostly reduces taxes for those at the top?\u00a0\u00a0<\/p>\n\n\n\n

It wouldn\u2019t be\u00a0because cutting taxes for the rich and corporations spurs the economy.\u00a0Since 2002, corporate taxes have been cut, and cut again, in Pennsylvania. The tax base for the Corporate Net Income Tax (CNIT),\u00a0which has a relatively high rate,\u00a0but also huge loopholes that allow 71% of corporations doing business in our state to escape taxation, has been shrunk.\u00a0And the second of our two corporate taxes, the Capital Stock and Franchise Tax (CSFT), which was designed to\u00a0ensure that\u00a0all corporations\u00a0paid something,\u00a0has been eliminated entirely.\u00a0We estimate that these changes cost the PA Treasury almost $4 billion in revenues every year.\u00a0The corporate share of Pennsylvania taxes has fallen from 30% of all revenues to 15% today.\u00a0<\/p>\n\n\n\n

Had these drastic cuts not taken place the state would have the funds to fix the inequality in our school funding, which is the worst in nation, and our fourth-from-the-bottom support of higher education. We would have more money for infrastructure. And adequate state funding for our schools would have prevented the rise in property taxes in many Pennsylvania counties. <\/p>\n\n\n\n

Have\u00a0these tax reductions brought us prosperity? Far from it.\u00a0With the exception of\u00a0four years\u00a0\u2013\u00a0three\u00a0of\u00a0which came\u00a0around\u00a0the Great Recession\u00a0\u2013\u00a0our state has ranked in the bottom half of all states for job growth\u00a0for 15 years.\u00a0Tax cuts led to over 20,000 teachers, social workers, and other public servants\u00a0being laid off during the Corbett years.\u00a0With so many\u00a0losing\u00a0jobs, consumption\u00a0and the economy stagnated.\u00a0<\/p>\n\n\n\n

These results shouldn\u2019t surprise\u00a0us. From a theoretical point of view, taxes account for too small a\u00a0share\u00a0of corporate costs to determine where businesses decide to locate\u00a0or how fast they grow.\u00a0And most job growth occurs in small businesses that are not organized as corporations and thus pay taxes at Pennsylvania\u2019s very low personal income tax rate.\u00a0And, most of the\u00a0time,\u00a0they\u00a0don\u2019t have much in the way of profits for their first few years anyway.\u00a0\u00a0<\/p>\n\n\n\n

When deciding where to locate, businesses look for an educated workforce and ease of access to their suppliers, consumers, and workers. And when they decide to invest in new productive capacity, businesses look to whether demand for what they produce is growing. Taxes on those businesses play little role in determining that. And government expenditures, as well as transfers from wealthy families that don\u2019t spend all they earn to lower- and middle-income families that spend most of what they earn increase consumption and, thus, investment.  <\/p>\n\n\n\n

For empirical support of the theory, look at Kansas and Louisiana. Both drastically cut business taxes and spending in the last decade. Their plan to create jobs and new economic activity failed. Reductions in taxes created little new investment and jobs and reductions in government spending sent the economies of both states into a tailspin. Tax revenues fell drastically, leading to even deeper government cutbacks, and further economic distress. Meanwhile, the children of both states saw the quality of the education they receive decline.  <\/p>\n\n\n\n

In contrast, states like California and Minnesota, which increased taxes during the Great Recession to avoid cuts in spending, saw their economies grow and jobs increase.  <\/p>\n\n\n\n

If we really want to make leave our children a more prosperous Pennsylvania and give them opportunities to advance no matter where in the state they grow up, we should be investing far more in Pre-K, K-12, and higher education, as well as in career training and apprenticeships for those who don\u2019t go to college. Investment in the skills and knowledge of our citizens, as well as in public infrastructure, is the way our state and country became a world economic leader while building a strong middle class. Our failure to keep up those investments, not high taxes, is the reason the top 1% in Pennsylvania have seen their incomes grow 125% since 1979 while the incomes of everyone else has grown only 12% in that time.  https:\/\/4f87f0a7bbf0f21b0e3c497b3a3c58ac.safeframe.googlesyndication.com\/safeframe\/1-0-37\/html\/container.html<\/p>\n\n\n\n

Rather than cutting taxes, it\u2019s time to ask the very rich to pay their fair share, while investing in the education and infrastructure that will create prosperity for all of us.  <\/p>\n\n\n\n

Marc Stier is the Director of the Pennsylvania Budget and Policy Center.\u00a0\u00a0<\/em><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Originally published in Public Opinion, March 21, 2018 In the aftermath of the Trump-GOP tax cut enacted at the end of the last year, some legislators and advocates are calling for Pennsylvania to\u00a0also\u00a0cut tax rates for both individuals and corporations in the hopes of spurring economic growth and job creation.\u00a0\u00a0 It is hard to think of a worse idea for our political community, not only because it is unfair, but because it has been tried and failed again and again.   Pennsylvania has one of the most unequal tax systems in the country. Low-income Pennsylvanians pay 12%\u00a0of their income in state and local taxes while middle-income Pennsylvanians pay 10%. But\u00a0those\u00a0with incomes in the top 5% pay only 6.8% of their income taxes while the top 1% pay only 4.2%. With a tax system\u00a0this\u00a0unfair, why should we emulate a federal tax cut that mostly reduces taxes for those at the top?\u00a0\u00a0 It wouldn\u2019t be\u00a0because cutting taxes for the rich\u2026 Continue reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[40,127,56,16],"tags":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p35YuU-2eo","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/8580"}],"collection":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8580"}],"version-history":[{"count":1,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/8580\/revisions"}],"predecessor-version":[{"id":8581,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/8580\/revisions\/8581"}],"wp:attachment":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}