Senator Aument speaks about economic opportunity and the vision for Pennsylvania’s future.
As we emerge from the COVID-19 pandemic, it’s time we revisit the conversation around economic opportunity and a vision for the future of Pennsylvania.
After the preliminary 2020 Census data was released earlier this year, we learned that Pennsylvania’s population growth has been so stagnant that we again lost a seat in Congress. This is the continuation of an unfortunate trend where the Commonwealth has consistently lost at least one Congressional seat in all of the last 10 censuses beginning in 1930.
The state’s inability to retain residents or attract new ones has cost us political influence in Washington.
Beyond our diminishing power in the nation’s capital, many Pennsylvanians have seen this outbound migration in action as they watch the dream of having their children live nearby fade away as economic opportunity pulls our younger generations out of the Commonwealth to jobs in other states where there’s greater promise of upward mobility.
Pennsylvania needs to be a place where every resident has the opportunity, and where new residents come, to experience earned success and upward economic mobility. We need to compete for new businesses and industry, and the jobs they create, to do just that.
Unfortunately, Pennsylvania consistently ranks amongst the worst states for business, claiming one of the highest corporate net income tax rates in the country, second only to New Jersey. With Pennsylvania’s current rate of 9.99%, we’re at a tremendous competitive disadvantage compared to most of our neighboring states who boast rates of around 6 to 6.5%.
We must take action to counter this population trend, incentivize working professionals and families to move here and stay here, and create economic opportunity for all our residents – the first step to achieving those goals is to make the state’s Corporate Net Income (CNI) tax rate competitive with that of neighboring states.
Data suggests that doing so would not only increase our population, but also increase home values AND wages for our residents all without negatively impacting state revenue.
Based on data from the U.S. census, research shows that lower corporate income tax rates are associated with higher rates of population growth. Additionally, interstate migration trends in 2019 show that many more people move to states with lower CNI rates than move to states with a higher rate, supporting the claim that states with lower CNI rates have more favorable business climates and better job opportunities.
Specifically, data modeling projects that lowering the CNI by one point can increase Pennsylvania’s population by an additional 18,000 people in the first year and that population will continue to grow each year thereafter.
Bottom line – reducing our state’s CNI rate would directly address our ongoing issues with outbound migration while at the same time providing real, tangible benefits to those who reside here in the Commonwealth.
In fact, lowering a state’s CNI rate is associated with increased growth in home values.
For the period between 2010-2020, data analysis shows that the 23 states with the lowest CNI rates experienced significant growth in typical home value compared to the 23 states with the highest CNI rates.
But perhaps the most compelling argument for lowering the CNI is the benefit that it would provide to Pennsylvania working families. Decades of research demonstrate that there is a direct correlation between lower CNI rates and higher wages for working class families.
Unfortunately, when politicians talk about lowering corporate taxes, many middle- and lower-class working families are skeptical that such a policy would benefit them. Though many believe that reducing corporate taxes would only help upper-class CEOs and large corporations, the data clearly shows that this is false and that individual employees and their families will also benefit greatly by enjoying higher wages.
Specifically, research shows that a one-percentage-point decrease in the top marginal CNI tax rate would lead to a meaningful increase of up to $223.35 in workers’ wages in our state based on annual mean wage in Pennsylvania in 2020.
Despite all the data showing the benefits of a competitive CNI rate, opponents usually claim that doing so would decrease state revenue thereby negatively impacting many vital state programs funded through the collection of CNI taxes.
However, states with the lowest CNI rates experienced 10% higher growth in state revenues from 2000 to 2020 compared to those states with higher CNI rates.
In summary, not only does the data show a strong connection between lower CNI rates and higher population, home values, and workers’ wages, but these goals are able to be achieved without impacting general fund revenue or raising taxes on Pennsylvanians.
For that reason, I have proposed Senate Bill 771 which would gradually reduce the state’s CNI tax rate to attract new employers and promote economic growth in the Commonwealth.
It is my hope that making Pennsylvania more economically competitive by lowering our CNI rate will benefit working class families, reverse our stagnant population growth, and ensure that Pennsylvania is an attractive place to live, work, and raise a family for generations to come.
It’s time to build a stronger Pennsylvania where entrepreneurship, innovation, and economic opportunity can thrive – a Pennsylvania where each and every resident has the opportunity to experience earned success and upward economic mobility.