BCT Editorial – 10/12/06

This page was last updated on October 14, 2006.

What gives?; Editorial; Beaver County Times; October 12, 2006.

Below is a detailed critique of the subject editorial.

“Pennsylvania’s overall business tax climate is and has been competitive

[RWC] For more than a year – and perhaps longer – Times editorials have tried to convince us being ranked #22 or thereabouts is a good thing. Let me ask a question I’ve asked before. Would the Times consider the Pirates or the Steelers “competitive” if they consistently finished their seasons with an equivalent ranking?

I want to minimize repeating myself, so please read my critiques of “No excuses” and “Ohio envy” from March 1^st for most of my comments about this editorial.

“Three-fifths of the states in the nation have business tax climates that are worse than Pennsylvania’s.

“So why is the commonwealth always scrapping [sic] bottom when it comes to job growth?

“The Tax Foundation released its 2007 State Business Tax Climate Index on Wednesday. The think tank said the index reflects the tax climate of each state as of July 1 of this year.

“The tax climate index takes an in-depth look at business levies, placing 113 variables into five component indexes: corporate tax index, individual income tax index, sales tax index, unemployment tax index and property tax index. It then averages them out to come up with its overall ranking.

“When the tax numbers were crunched, Pennsylvania’s business climate was rated 22nd best in the nation, the same slot it held in 2006. The indexes broke down as follows: corporate tax, 42nd; individual income tax, 10th; sales tax, 23rd; unemployment tax, 13th; and property tax, 44th.

“It would have been better if Pennsylvania was higher up on the list, but 22nd place isn’t shabby - or uncompetitive.”

[RWC] We’re #22! We’re #22! Hip, hip, hooray!

“The top 10 states were (one through 10) Wyoming, South Dakota, Alaska, Nevada, Florida, Texas, New Hampshire, Montana, Delaware and Oregon. The bottom 10 states (41 through 50) were Minnesota, Maine, Iowa, Nebraska, California, Vermont, New York, New Jersey, Ohio and Rhode Island.

“Pennsylvania was nestled between four Sun Belt states - Georgia (No. 19), Alabama (No.) 20, Oklahoma (No. 21) and New Mexico (No. 23) - and Hawaii (No. 24) and Illinois (No. 25.).

“With the exception of Vermont and Delaware, Pennsylvania has the best tax climate in the Mid-Atlantic and New England. (Six of the 10 states in the bottom 10 were in those regions.) Neighboring West Virginia and Maryland were 34th and 29th, respectively, while Massachusetts was No. 36 and Connecticut was No. 37.

“The state’s business climate is also better than several growth states in the Sun Belt. For instance, South Carolina was 26th and Arizona was 28th.

“But the real eye opener was North Carolina’s overall business tax rating. It’s relevant to our region and our state because it seems that every time US Airways has had to pick between Pennsylvania and North Carolina, it has gone south.”

[RWC] Could it have anything to do with North Carolina being a right-to-work state? Of course not, that’s crazy talk. <g>

There are a couple of other points the editorial failed to note. While the NC overall ranking was low, consider the following. The NC corporate income tax rate (6.9%) is only 70% that of PA’s (9.99%) and the PA capital stock tax rate is 3.26 times that of NC. Further, the max capital stock tax payment is $75,000. PA has no limit.

“Yet North Carolina barely missed making that bottom 10. It was 40th. How close did it come to being in the bottom 10? Real close. No. 41 Minnesota had an overall score of 4.68, and North Carolina’s was 4.72.

“The state must make its business tax climate more competitive, and one way to do that is to address the high corporate tax index rating. Being No. 42 there doesn’t cut it.”

[RWC] The only way to make the business tax climate more competitive is to cut spending so total taxes can be cut. Merely lowering one tax only to compensate by increasing another tax doesn’t work.

“Clearly, though, business taxes alone aren’t responsible for the commonwealth’s pathetic growth over the last two decades. It’s time the people of Pennsylvania start asking their elected leaders, ‘What gives?’”

[RWC] Perhaps the only thing the editorial got right was observing business taxes aren’t the only factor to consider when looking at a state’s economic attractiveness. Other factors include labor environment, wages, cost of living, cost of doing business, regulations, tort law, weather, location, topography, transportation infrastructure, et cetera.