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Pennsylvania can’t control inflation, but it can reform its tax, subsidy system

By Anthony Hennen | The Center Square

(The Center Square) – Pennsylvania’s high taxes and spending, and its use of business subsidies, came under fire from tax experts and business leaders in a committee hearing on Tuesday.

The Republican Policy Committee held its fourth hearing related to inflation, economic growth, and the problems facing the commonwealth; the previous hearing focused on how inflation has hurt working families, as The Center Square previously reported.

“The goal of these hearings is to better understand the policies having the greatest impact, how working people and their families are dealing with inflation, and most importantly what we can do to combat rising costs in the long term,” Rep. Martin Causer, R-Bradford, said in a press release.

Business taxes were a main focus.

“Any plan that purports to improve Pennsylvania’s competitiveness and future prospects that does not cut the 9.99% business tax is not serious,” said Joe Bishop-Henchman, executive director of the National Taxpayers Union Foundation. “Sending out checks or creating new regulations to put a thumb on the scale of innovation and competition have generally proven ineffective at achieving economic growth in other states.”

Instead, Bishop-Henchman argued a level playing field that encourages competition and puts less of a burden on businesses will benefit all Pennsylvanians.

“While Pennsylvania has limited control over federal policy, Pennsylvania does have control over whether its policies are competitive with its neighbors and with international competitors for jobs, investment dollars, and talent,” Bishop-Henchman said.

Federal and state policy have made those economic challenges tougher to fix.

“Inflation is first and foremost a monetary phenomenon that has resulted in too much money chasing too few goods and services,” said Timothy Vermeer, a senior policy analyst at the Tax Foundation. “Bad tax policies make matters worse by artificially raising costs and keeping firms and their employees from reaching their full production and full earnings potential.”

The burden on businesses isn’t always solved by big tax reductions or an elimination of a tax altogether, Jared Walczak, vice president of state projects at the Tax Foundation noted. Instead, a better path forward comes from imitating states like Utah, North Carolina, or Indiana and making tax policies as neutral to people as possible, allowing for growth.

“Beyond just the money you pay in taxes, it’s the time it takes that really sucks the life out of small businesses,” said Rep. Valerie Gaydos, R-Moon Township.

While inflation will continue to cause economic problems, Pennsylvania has an opportunity to lessen the impact. At least for a corporate income tax cut, Republicans and Democrats have supported such an effort.

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