CNBC has compiled a ranking of "America's Best States for Business." Pennsylvania ranks 33rd overall on their index, and gets very poor marks on categories "Cost of Business", "Workforce", "Business Friendliness", and "Economy." (HT PAWaterCooler)
The Pennsylvania legislature got a "F" from the Center for Public Integrity in a national report on lawmakers disclosing information about assets, holdings or connections to special interests. In this study which looks at accountability, performance, professionalism, efficiency, cost-saving and disclosure of information by the legislature, the PA legislature dropped two slots to 35th among states. So what do other states do that PA does not:
Governor Rendell has declared that Pennsylvania no longer has a "crisis" in medical malpractice lawsuits, citing recent declines in the number of suits filed. Critics claimed that reform have weeded out junk lawsuits, but there is still a high cost of litigation which continues to make Pennsylvania unfriendly to doctors.
The Pacific Research Institute gave Pennsylvania a lowly ranking of 45th out of 50 states on their 2008 Tort Liability Index, including 36th on Medical Malpractices Losses.
Indeed, while Governor Rendell has proposed dropping the MCare Abatement, a subsidy from the cigarette tax - to fill the budget gap and because he refused to renew it unless the legislature passed RendellCare, which they refused - doctors and hospitals will still be required to pay into MCare. MCare is the state program which supplements health care providers' private medical malpractice insurance, for lawsuit awards over $500,000.
Instead, Governor Rendell should end MCare entirely, and embrace real tort reform, including joint and several liability - limiting a party's share of the liability costs to their share of the responsibility - and caps on non-economic damages.
The Small Business and Entrepreneurship Council has a new ranking of the best state tax systems for small business. Pennsylvania ranks 29th (1 being the best). Click here for the full report.
Here are some other recent rankings of Pennsylvania economic climate and tax policy:
ALEC has released the 2nd edition of their Economic Competitiveness Index - Rich States, Poor States - which looks at which policies drive economic growth among states, and which states are winners and losers:
The governments in the Northeast are already about one-fifth more expensive than in the rest of America – $6,400 versus $5,200 of state spending per resident. Only in recent years has the gap between the New England states and the rest of the nation been narrowing (see Table 2). However, an average-income family of four still saves $4,000 a year by moving to just an average tax state and more like $6,000 a year by moving to Florida. Because the Northeastern states tend to have highly progressive tax systems, the incentive for wealthy families to relocate is greater.As usual, Pennsylvania ranks among the worst states in the union - 46th in terms of economic performance, and 42nd for economic outlook; here is the Pennsylvania profile. This may be a stunning report for Gov. Rendell, who continues to demand praise for "creating jobs", despite evidence that spending more taxpayer money on "economic development" undermines economic growth.
Meanwhile, the Northeast is becoming increasingly inhospitable for employers. Labor costs are about 30 percent above the national average in this region. Of the 22 right-to-work states, a grand total of zero are in the Northeast. Other than taxes, this is arguably the greatest factor impeding economic competitiveness
in the region.
As the report notes, states that want to pursue statist policies do not have their own version of a Berlin Wall to prevent people from leaving. They do, however, have something almost as powerful. They’ve got a Congress that’s willing to undermine this important feedback (i.e., accountability) mechanism by handing out $200 billion plus in bailout money to the states. States that get bailed out by the feds have less of a need to face the failures of their own policies. Could the declining fortunes of states governed by liberal policies also explain the desire of the White House to exercise greater control over the conduct of the next Census?
The Bureau of Economic Analysis has released the latest data on personal income by state. For the first time in many years, Pennsylvania grew faster than the nation as a whole - 4.0% to 3.9% - and ranked 28th among the 50 states.
That bit of good news (tempered by the fact that is a relatively slow rate of growth, and that PA historically is behind the nation both in entering and exiting a recession) aside, Pennsylvania still lags behind the rest of the nation in job, income, and population growth under Governor Rendell; ranking 33rd, 40th, and 43rd among the 50 states, respectively. Had Pennsylvania grown at the same rate as the U.S. since 2002, the state would have 72,000 more jobs; 550,000 more residents, and $19.5 billion in additional personal income.
As a point of reference, I included Texas, as Gov. Rendell's minister of propaganda has claimed Pennsylvania has done better than any other "large state" - which is clearly false.
Chuck Ardo - spokesman for Gov. Rendell - has an op-ed in Sunday's Patriot News about what a great success Gov. Rendell's economic policy has been. This taxpayer-funded propaganda criticizes unnamed "conservative characters" because they "confuse dogma with established fact." Amazingly, Ardo seems to ignore all established facts about Pennsylvania's economy.
Ardo asserts, for instance, that Pennsylvania has more jobs now than when Rendell took office, as though every single new job is created by government, not the private sector. He ignores the fact the Pennsylvania has lagged behind the rest of the nation in job, population, and income growth since Rendell took office (ranking 40th, 42nd, and 40th in those categories since 2002). More importantly, states that spend the most on "economic development" (Pennsylvania ranks second) have slower economic growth than the rest of the U.S, whereas states with lower taxes outpace high tax states (again, PA is on the wrong end of the spectrum)
Ardo's rhetoric can't quite explain why residents keep "Movin' Out" of Pennsylvania to other states. Pennsylvania is the 4th highest "outbound" state, according to United Van Lines. The Commonwealth lost 12,000 residents to other states last year, and 58,000 since 2000, according to the US Census.
Pennsylvania gets low marks from almost all independent rankings of the state's economic competitiveness. Forbes considers PA the 10th worst state to do business; the Beacon Hill Institute Ranks PA 39th, ALEC ranks the state 44th, and CEO Magazine ranks us 37th.
Most blatantly false is Ardo's statement that "Pennsylvania [is]on stronger economic footing than any other large state in America." Isn't Texas still considered a "large state"? In 2008, Pennsylvania lost 77,000 jobs; Texas added 155,000, despite a national recession. Since Rendell took office, Pennsylvania has added 109,000 jobs; Texas has added 1.03 million - over nine times as many.
Ardo is correct when he compares Pennsylvania positively to our neighbors, particularly New York and New Jersey, whose economies and state budgets are in bad shape. Unfortunately, Rendell seeks to imitate the failed policies of these states, rather than those of thriving states.
The Mercatus Center has a new report ranking freedom - both personal and economic - in the 50 states. Overall, they rank Pennsylvania 20th. See a related story in the Post-Gazette. In their three categories - Fiscal Policy, Regulatory Policy, and Paternalism/Personal Freedom - Pennsylvania ranks 32nd, 3rd, and 29th. Here is what they say about Pennsylvania:
At #20, Pennsylvania is freer than all six of its neighboring states. The state is not particularly good on fiscal policy, however, with a high debt ratio and government spending. For a northeastern state, its gun control laws are not awful. By our admittedly crude measures, Pennsylvania actually has the most liberal gambling laws in our dataset, being the only state to legalize statewide all forms of gambling we track: Internet, track, casino, pari-mutuel, charitable, and slots. However, the law does not have a social gambling exception, and the government presumably tightly regulates each of these forms of gambling. Pennsylvania’s home school laws are draconian, and its private school regulations are not much better. Teacher qualifications and licensing need to be repealed, and standardized testing, notification, and record-keeping requirements reduced. Pennsylvania is one of only three states to have no form of community rating in small group and individual health insurance (Hawaii and Virginia are the other two). However, mandates are rather high, raising the price of health insurance policies at least 46%. Occupational licensing is quite rare. Smoking bans have not gone far at all.Of course, Pennsylvania seems to be losing some of its freedom - these rankings don't include Pennsylvania's statewide smoking ban, which would certainly drop the rankings, and Governor Rendell has been pushing community rating. Likewise, many might disagree with Pennsylvania gambling laws as a positive for freedom - given the role of state government in licensing gambling monopolies to the politically connected.
The Small Business and Entrepreneurship Council has a new report ranking states in terms of their health care policy, as it pertains to small business. Pennsylvania gets a fairly decent ranking, at 8th overall. The categories include the number of mandates, whether a state has a "pay to play mandate", guaranteed issue for plans of one, community rating, and tax deductibility for HSA contributions.
While PA has a large number of mandates, driving up its score (a low score is good, like in golf), the fact that the state does not have guaranteed issue, community rating, or a "pay to play" mandate (along with tax deductible HSA contributions) boost the rating. The bad news is that Governor Rendell has proposed, at various points, an employer mandate, modified community rating, and guaranteed issue, as has President Obama on a national scale. Adding any of these would hurt Pennsylvania's competitiveness, and increase the cost of health care for small businesses.
Relatedly, the NCPA has a brief on solutions to lower the cost of health care small businesses, including:
The Tribune Review has a story featuring Tax Foundation president Scott Hodge discussing Pennsylvania's business tax climate at an appearance in Pittsburgh:
The state needs to slash its corporate net income tax from 9.99 percent to about 3 percent to match the level of its personal income tax (3.07 percent) and scrap most of the myriad of tax incentives it offers in hopes of boosting specific companies or business segments. ...
Hodge said the foundation finds the corporate income tax to be the worst impediment of all business levies when it comes to a state's competitiveness.
Cutting it by 7 percent could save the state's businesses about $1.4 billion, he said, and the state could make up at least a part of that revenue by trimming a long-list of incentive and economic development programs.
Our sister think tank, the Mississippi Center for Public Policy, recently released "A Stone's Throw." The film documents the frustrations of parents in Mississippi--a state notorious for its low educational achievement. According to the American Legislative Exchange Council, in 2007, the state ranked 50th in 8th grade reading and mathematics and 49th in the same 4th grade categories.
"A Stone's Throw" highlights parents' desire for school choice. Mississippi does not have a charter school law, unlike the more than 30 other states that currently allow such options. Ironically, Helena, Arkansas--just a stone's throw away--has a KIPP preparatory school, while Mississippi students are forced to choose from a menu with only one option: local failing schools.
The Census Bureau released the latest annual population estimates. The trends for Pennsylvania remain much the same:
The Beacon Hill Institute has issued a new report on state economic competitiveness. Not surprising, Pennsylvania ranks poorly - 39th out of the fifty states. You can find the rankings and the Pennsylvania profile (page 53) in the full report here.
The Center for Education Reform ranks
In
Nationwide
Public schools are in trouble, spending is out of control,
The Cato Institute gives Pennsylvania Governor Ed Rendell a "D" on its Fiscal Report Card of the Governors.
In 2004, Governor Rendell pushed through a $1.5 billion tax increase that raised personal income tax rates, business gross receipts taxes, and cigarette taxes. In 2005, the governor proposed a reduction in Pennsylvania’s 10 percent corporate tax rate, but the reduction was not passed. Indeed, the governor reversed course in 2006 and vetoed a bill that would have cut both personal and corporate tax rates. In 2007, he proposed increasing the sales tax rate from 6 to 7percent and imposing a special tax on oil company profits, but the legislature rejected those ideas. On spending, Rendell has supported large increases for transportation, education, alternative energy, and overall general fund spending has increased at a fairly rapid pace.Click here for the Full Report.
The Tax Foundation has released its latest State Business Tax Climate Index. Pennsylvania ranks a middling 28th on the index, which takes into account five factors (listed in order of rating):
For Labor Day, the Fraser Institute has a new report on state and Canadian provinces labor markets.
It may stun some in the Rendell administration, but not readers of this blog, to learn that Pennsylvania ranks poorly on this index - 49th out of the 60 states and provinces - with the major categories including the average employment growth, unemployment rate, duration of unemployment, and productivity per worker, from 2003-2007.
An article in the Wall Street Journal today underscores the issue of high corporate tax rates in Pennsylvania.
It also discusses the impact of corporate tax rates on America as a whole, pointing out that other countries around the world with lower rates are experiencing growth:
Every month that goes by without tax reform, America is a relatively less attractive place to do business. Over the past 18 months, nine of the 30 most developed nations and 20 countries world-wide -- from Israel to Germany to Turkey -- have cut their corporate tax rates. Nations are slashing rates to attract capital and jobs from the U.S., and the tragedy is that our politicians keep making it easy for them.This article confirms what others have been saying about the condition of business and the economy in Pennsylvania.
Forbes has issued its latest report on "The Best States for Business". Pennsylvania ranks 41st. (Click here for the table). Amazingly, despite Governor Rendell's "investments" in our economy, that represents a drop of two spots since last year.
Here are more recent rankings of Pennsylvania's economic and business climate:
The Tax Foundation has released their yearly report ranking the state tax burden for all 50 states. Pennsylvania comes in at number 11 (1 being the worst). PA consistently ranks high, with our best showing at number 24 (in 1990). Over the years Pennsylvania has consistently raced ahead other states climbing from 17 to 16 to 13 but has struggled to break the top ten.
Using Census Data, the foundation reports Pennsylvania’s per-capita income at $43,796, with $4,463 going to state and local taxes. Of that total $3,054 was paid to the commonwealth, and $1,409 per capita was paid to other states. In comparison, the US average for taxes paid to other states is $1,358.
In 1990 US taxpayers contributed approximately 9.9% of their income to state and local taxes, Pennsylvanians paid 9.8%. While the US average has decline (to 9.7%), PA's tax burden has risen to 10.2% in 2008. That may not seem like a big difference, but for a family of four 0.4% means approximately $700.
Perhaps our high tax burden is related to the fact that Pennsylvania legislators make $76,163 a year, ranking fourth behind New York, Michigan, and California.
If you want more depressing facts read the rest of the story from the Pittsburgh Business Times. If you want to find out how to lower taxes by controlling state spending check out PAdietplan.com.
