After a two month recess, the General Assembly reconvened for the fall legislative session. For the first time since the end of the Great Recession, Pennsylvania’s unemployment rate has steadily risen to meet the national average. With only one month remaining before adjourning until next year, the House Finance Committee swiftly approved legislation by Rep. Kerry Benninghoff (Centre) aimed to bolster job creation.
Chairman Benninghoff’s proposal, Promote Employment Across Pennsylvania Program, or PEP, is designed to entice companies to relocate to Pennsylvania. The bill would enable qualifying businesses to retain 95 percent of their employees’ state personal income taxes with the remaining 5 percent going to the Treasury. Based on the average Pennsylvania worker earning nearly $46,800 and state income taxes at 3.07 percent, businesses would retain an extra $1,400 per new employee. Rep. Scott Boyd (Lancaster) intends to offer a floor amendment so that existing companies would be permitted the same tax incentive.
PEP is specifically crafted to encourage middle class job growth. Qualifying businesses must pay at least half of their employee health premiums in addition to wages equal to the county average. The Department of Revenue would be responsible for approving applications and monitoring the program. Eligibility for the tax incentive will range between five and ten years depending on the business’ size.
Undoubtedly, this measure will encourage expanding payrolls and the strengthening of communities throughout the commonwealth. While the state may only be collecting a small portion of personal income taxes on new workers, it will gain financially from relocated businesses who pay corporate incomes taxes, or if a small business, the business’ state income taxes.
This proposal is far superior to the hundreds of millions of state income tax dollars that go to private businesses through subsidies, loans and grants. These kinds of “economic development” programs create mass distortions in the market place and are often giveaways to special interests such as the solar or film industry. PEP is not a handout, but rather a performance based tax benefit for investing and expanding operations in Pennsylvania.
While PEP may be a novel idea for incentivizing job creation, reducing the commonwealth’s highest in the nation corporate income tax is a bold proposal to improve the state’s dismal business climate. Last session, the House passed (stalled in Senate) a revenue neutral 30 percent rate reduction by simply closing one tax loophole. Corporate tax reform would greatly increase competitiveness for all businesses.
With an astonishing half million citizens out of work, Pennsylvanians should not have to wait for their full-time legislature to return in January to refocus on the economy. The House Finance Committee’s diligence toward approving Promote Employment Across Pennsylvania is a step forward in passing legislation aimed at boosting private sector job creation.