Study Disputes Claims of Business Taxes' Harm

PHILADELPHIA-A study by Harrisburg, PA-based Keystone Research Center refutesclaims made in a business-sponsored study by Harrisburg, PA-based Pennsylvania Economy League that concludes the state’s business taxes prevent companies from locating here. KRC finds the PEL study failed to consider property taxes and sales taxes when making comparisons with other states.

“When we examined Pennsylvania’s taxes, we found that the state’s business burden is similar to that of other states,” says Stephen Herzenberg, economist and executive director of KRC, an independent research company.

According to the KRC comparisons, Pennsylvania businesses paid $940 per capita in state and local taxes in 1999, compared with the $962 per capita average paid by business among all states. KRC concedes that makes Pennsylvania’s business taxes 17th highest in a 50-state ranking.

Eileen McNulty, co-author of the KRC study and former secretary of the Pennsylvania Department of Revenue, urges state legislators to look to factors other than taxes to spur economic development, specifically the “quality of education, workforce skills, and infrastructure.”

Citing its findings and the state’s budget shortfall, KRC recommends putting a planned phase-out of the state’s capital stock and franchise tax that currently generates $1 billion a year on hold. KRC also calls for a “21st Century Tax Commission” to define tax reforms that are “business friendly, but also expand economic opportunity.” Herzenberg suggests, “tax cuts may be the junk food of economic development, politically palatable, but not nutritious for a growing healthy economy.”