Pennsylvania Will Fall Behind Economically Without Targeted Investment, Officials Say

Feb 26, 2020

Pennsylvania officials say the state lags behind its neighbors when it comes to attracting new businesses and creating jobs. In a budget hearing Wednesday, lawmakers sought assurances that investments made by the Department of Community and Economic Development will pay off.

Legislators had a lot of questions about the array of tax credits DCED uses to spur economic activity. Incentives always get the attention, but that’s not why businesses decide to grow or set up shop in the commonwealth, said DCED Secretary Dennis Davin.

“The issue is that we need a strong workforce and we need to reduce that corporate net income tax,” he said. “We have to do it.”

The corporate net income tax rate in Pennsylvania is 9.9 percent, among the nation’s highest. In his 2020-2021 budget, Gov. Tom Wolf has again proposed cutting the tax; the rate would drop to 5.9 percent over the next five years. The reduction is critical if Pennsylvania is to present itself to national and international companies as a great place to do business, said Davin.

The DCED plans to invest in programs that reduce barriers to employment and provide people access to workforce training. The budget also sets aside $12.5 million to bolster the state’s technology and innovation sector.

The Brookings Institute released a report in August 2019 that urged Pennsylvania to recommit its resources to supporting people and institutions to compete in the 21st century economy.

Davin said Pennsylvania has fallen short, especially when compared to other states. The $12.5 million “is a down payment,” he said. “We need to [invest] in such a way … that increases the amount of private money that comes in.”

That’s the model of places like Silicon Valley, New York City, and Boston.

Tax breaks

Several lawmakers urged Davin to support a bill that would extend a tax break to companies, such as fertilizer manufacturers, who would use the state’s natural gas. The “Energy and Fertilizer Manufacturing Tax Credit” won bipartisan support in both chambers, but Wolf has said he’ll veto the legislation. Davin said in its current form the bill is too narrow, and could be expanded to attract even more businesses.

“We just think that it could be developed a little differently,” he said. “Broadened enough to have a tremendous impact.”

In a tense exchange shortly before the hearing ended, Republican Representative Stan Saylor, chair of the appropriations committee, interrupted Davin.

“It’s jobs. It’s jobs, it’s jobs,” he said. “And when you’re already lagging behind New Jersey and New York, the last thing you do is reset the clock on a piece of legislation that’s ready to become law for creation of jobs.”

Davin said he could not support the bill in its current form.

The Census

Fundamental to the state’s success is full participation in the U.S. Census, lawmakers said. DCED has $4 million to encourage all residents to be counted. Saylor noted that a low count could cost the commonwealth a congressional seat.

Republican Representative Lee James of Venango County said fewer than 80 percent of Pennsylvanians responded in 2010.

“Each citizen who didn’t respond cost the commonwealth of Pennsylvania $2,100 of federal aid every year, for ten years.”

DCED officials say they are releasing materials and crisscrossing the state to raise awareness of what’s at stake.