What had seemed a promising effort to limit state spending growth in Pennsylvania fell short in the 2005-06 session of the Pennsylvania General Assembly. Lawmakers adjourned without enacting the Taxpayer Fairness Act (TFA).
“The financial imperative of slowing state spending should be obvious to all,” said state Rep. Sam Rohrer (R-Berks), chairman of the Commonwealth Caucus, a group of Pennsylvania state legislators who have consistently worked to restrain spending. “The simple indexing of [spending] growth to economic growth is one simple way to avoid future tax increases and still permit restrained yet reasonable growth.”
Despite the failure to maneuver a spending limitation through Pennsylvania’s legislative minefield, there is growing recognition among residents that the state cannot continue its free-spending ways and expect to compete effectively with other states for jobs and economic opportunity.
Long-term figures confirm that conclusion. A June 2006 report from the Washington, DC-based Tax Foundation revealed that between 1970 and 2006, Pennsylvania’s state and local tax burden increased by 20.2 percent–the ninth-largest increase among the 50 states.
Economic Performance Near Bottom
Pennsylvania was near the bottom of the national chart in terms of employment growth (49th among the 50 states from 1970 to July 2006), population growth (47th among the 50 states between 1970 and 2005), and personal income growth (45th among the 50 states from the first quarter of 1970 to the first quarter of 2006).
When the performance of Pennsylvania and the other nine states with the largest increases in their state and local tax burdens is contrasted with that of the 10 states with the largest decreases in tax burden between 1970 and 2006, the economic case for fiscal restraint is evident:
- The 10 states with the largest increases in their state-local tax burdens had a cumulative employment growth rate of 53.7 percent between 1970 and July 2006. The 10 states with the largest decreases in their state-local tax burdens had a cumulative employment growth rate of 193 percent.
- The 10 states with the largest state-local tax burden increases had a cumulative 1970-2005 population growth rate of 18.3 percent. The corresponding growth rate in the 10 states with the largest state-local tax burden decreases was 88.8 percent.
- From the first quarter of 1970 through the first quarter of 2006, the 10 states with the largest state-local tax burden increases had a cumulative personal income growth rate of 978.3 percent, while the 10 states with the largest state-local tax burden decreases had a cumulative personal income growth rate of 1,589.9 percent.
State Rep. Daryl Metcalfe (R-Butler) said, “Reducing state spending is a tried and true economic stimulus initiative that will leave more money in the hands of taxpayers, increase private-sector investment by individuals and businesses, and create more jobs.”
Grant R. Gulibon ([email protected]) is an independent public policy consultant in Harrisburg, Pennsylvania, a fellow of the Commonwealth Foundation, and author of “Pennsylvania’s Unlimited Government Equals Limited Economic Growth,” a report issued in October by the Commonwealth Foundation.
For more information …
“Pennsylvania’s Unlimited Government Equals Limited Economic Growth,” Commonwealth Foundation, October 2006, is available online at http://www.commonwealthfoundation.org/index.cfm?mainContent=/research/index.cfm§ion=commentaries&articleID=1759&articleType=29
The Commonwealth Foundation, http://www.commonwealthfoundation.org
The Commonwealth Caucus, http://www.commonwealthcaucus.org.