Pennsylvania Fiscal reform

CHANGES NEEDED TO HALT PENNSYLVANIA'S DECLINE

COMPETITION BETWEEN STATES TO INTENSIFY

A few months ago I took notice to a decline in enrollment at Northwestern Lehigh school district. There was a decline of 200 students in the last 10 years. This is close to 10%. At first I thought it was a situation unique to this rural district, the recession etc. Then it was revealed that only 2 districts out of 17 surveyed in the Lehigh Valley gained enrollment since 2009. Catasauqua declined 16.5%, Southern Lehigh 11.4%, East Penn 8.1%, Northwestern Lehigh is listed at -6.8%. Northampton and Northern Lehigh gained between 2 and 3%. I also talked to people in other parts of the state and the trend is state-wide. If you check live births in Pa. most counties are either flat or very slightly down, the few that are up are not up enough to cause an increase in population. The latest census estimate is that last year Pennsylvania's population was down .06%. The real numbers will be tabulated in 2020. While the population has been flat for some time, it seems that Pennsylvania may be losing the young, possibly most productive age group to better opportunities in other states. I come to this conclusion by looking at the school enrollment and live birth numbers.

The move of population from the northeast to the south and west has been going on for decades. In 1936 Penna. had 36 seats in the U.S. House. It is now 18 and has been losing an average of 2 seats every 10 years. This does weaken the political power of the state. Many may believe that it really doesn't matter, but we will find it does really matter. The state revenue is estimated to have declined this past year. The usual response of Politicians is to raise taxes on those who are still here. That is a recipe for disaster. That is the same tactics that have contributed to the decline of most major cities. It is time for a long hard look at what can make Pennsylvania more competitive in economic favorability.

Pennsylvania has the 10th highest overall tax rates in the country. The State is 50 out of 50 in keeping established businesses, 49 out of 50 in attracting new business. The state is 13th in property tax rates. Hi-tax California's property tax on a property assessed at $384,000 is $2839.00.  Pennsylvania has the second highest Corporate tax rate in the country at 9.99%. North Carolina the lowest at 4%. Pennsylvania is not competitive with their tax rates. I don't know about regulation competition, but I do know from my personal experience the regulatory environment in Pennsylvania, especially with the DEP, is one of confrontation rather than cooperation. All this may become more acute when President Trump decreases Corporate rates to be competitive with the rest of the world. This alone will make the USA a more attractive place to do business. While it may not bring business rushing back to our country, it will help to stop the bleeding out of the country. It will also increase the competition between states to bring the new business and expansions to their state. Why is Boeing now in South Carolina and not in Pennsylvania? Why is Intel's new plant in Arizona and not in Pennsylvania? Its not hard to figure out, because Pennsylvania politicians have been more focused on dividing the pie and increasing taxes, than in making the pie larger. In the end this will lead to financial crisis, with ever increasing public sector pension debt and less and less income in the future.

While there is some talk of fiscal reform in Harrisburg most of it is tinkering around the edges. There needs to be a major evaluation of the fiscal  policy of the state to make it more competitive with the rest of the country.  It should start by lowering the state corporate tax rate to 5%, or better yet, eliminate all property taxes and raise the income tax to the same level for all taxpayers. Most new business coming to Pa. now negotiate tax abatements for some time. In Monroe county, business were leaving at a rate that the county has taken advantage of the, "Local Economic Revitalization Tax Abatement Act". This act does away with all taxes including school taxes for 5 years, it declines 20% a year. They believe it is helping to revitalize the tax base in the area. A similar program was recently used in Allentown. These programs are all temporary and what the long term success will be is yet to be determined.

Eliminating the archaic, discriminatory property tax would go a long way in making Pennsylvania a competitive place to establish a business. It would also encourage young educated productive workers to stay in the state. It would free up money to be spent on economic activity. It would spread the burden of taxes to a wider segment of the population not just property owners. This and regulatory reform where regulators help people comply rather than an adversarial mentality that hopes to stop development entirely.

While Pennsylvania has many advantages in open space, adequate water, access to an Atlantic port and a skilled workforce the State may be left behind by the rest of the country if it does not make an effort to make Pennsylvania an attractive place to live and do business.