This article originally appeared on Spotlight PA.
As inflation has soared to its highest levels in 40 years, driving up the price of groceries and gas and squeezing household budgets, Pennsylvanians have consistently identified the economy as one of the top issues influencing their choice in the 2022 governor’s race.
There’s not much that Pennsylvania’s next governor can do to directly tackle inflation or its underlying causes, but the governor can help blunt the impact that rising prices has on residents. The next governor will also oversee the state agencies that provide grants, permits, and tax incentives to businesses large and small, and set the state’s economic policy agenda.
For the two major party candidates, economic issues offer some rare common ground in a race that has mostly highlighted their starkly different views. Attorney General Josh Shapiro, the Democratic nominee, and state Sen. Doug Mastriano, a Republican representing Franklin County, agree that Pennsylvania needs to cut red tape, lower business taxes, and direct more funding towards the state’s roads and bridges.
Still, their views on economic development can’t be easily disentangled from their positions on other issues. Mastriano rose to prominence as a vocal opponent of Democratic Gov. Tom Wolf’s coronavirus shutdown orders, casting himself as a champion of small businesses chafing under restrictions put in place to protect public health. As governor, Mastriano says he would focus on restoring Pennsylvania’s status as a “manufacturing powerhouse,” and work to bring tens of thousands of “good-paying, blue-collar jobs” to the state.
Shapiro argues that Mastriano’s views on social issues, including his support for a ban on abortions after roughly six weeks of pregnancy, would cost the state jobs. At a recent candidate forum organized by the Pennsylvania Chamber of Business and Industry, Shapiro said Mastriano’s stances on abortion, marriage equality, and climate change would “make it harder for every employer in this room to be able to attract the kind of talent that we need.” In June, the CEO of Duolingo, a tech company headquartered in Pittsburgh, said the company would have to grow elsewhere if Pennsylvania made abortion illegal.
Below, we break down the two major party candidates’ positions on some of the key economic issues ahead of the Nov. 8 election:
For years, Pennsylvania had the second-highest corporate net income tax rate in the U.S., and lawmakers in Harrisburg couldn’t agree on a way to lower it. Business leaders complained that the high tax rate kept Pennsylvania from being able to lure companies here from other states and stifled job growth.
This year, the stalemate ended. Wolf and state lawmakers agreed to lower the tax rate by one percentage point starting in January; it will then keep dropping by 0.5 percentage points each year until it reaches 4.99% in 2031. That would make Pennsylvania’s tax rate the ninth-lowest in the country, compared to other current rates, according to the Tax Foundation, a Washington, D.C., think tank.
Mastriano and Shapiro both support the change but want the tax rate to be cut further and faster. Shapiro says it should be reduced to 4% by 2025. Mastriano wants to lower it to 2.4% by 2026 — or by 2030, if lawmakers won’t agree to cut it more quickly. Mastriano’s plan would make Pennsylvania’s tax rate the lowest in the nation, according to a Tax Foundation comparison of state rates as of July.
The tax cut that passed the General Assembly this year, combined with other tweaks to the tax code, will cost the state $202 million in foregone revenue in the next fiscal year, according to a legislative analysis. Cutting it further would cost even more.
A spokesperson for Shapiro’s campaign said the tax cut could be offset by Pennsylvania’s billions of dollars in surplus, and that lower business taxes would lead to significant economic growth, boosting state tax revenues overall.
Mastriano told Spotlight PA in response to written questions that the tax cut would bring new businesses and workers into the state, so the revenue loss would be “negligible.”
Another point of agreement between the two candidates: Pennsylvania needs to cut the red tape that businesses run into when dealing with state government.
Mastriano plans to eliminate at least 55,000 state regulations in his first 100 days in office. He’s also said he’d work with the General Assembly on legislation that would automatically review all regulations that cost more than $1 million and eliminate two regulations for any new regulation created.
It would be faster to remove regulations via legislation than through an administrative process, which would require a 30-day public comment period, said Cary Coglianese, a law professor at the University of Pennsylvania and an expert on government regulation. But, he cautioned, “the number doesn’t matter,” since what counts as a regulation is somewhat arbitrary. Some regulations are obsolete, so neither scrapping nor keeping them would have any real impact, while others provide important benefits, Coglianese said. “A regulation is just a tool and sometimes those tools can be used in ways that are good and productive and sometimes not.”
Mastriano also says he would make the state’s permitting process more transparent by signing legislation that would create a tracking system for applications, allow for third-party reviews of delayed decisions, and “deem approved’ permits that aren’t decided on within 45 days.
Shapiro has spoken about the need for state government to develop a “yes mentality” when working with businesses. “Too often the attitude of state government is ‘no, you can’t’ and we need to flip that around,” he said in an interview with the PennLive editorial board earlier this month.
Shapiro says he would create a “one stop shop” in the governor’s office to help businesses navigate the process of applying for state permits, licenses, and grants. On his first day in office, he plans to sign an executive order that would require state agencies to give applicants a response deadline; if the agency doesn’t respond in time, the application fee would be refunded.
Pennsylvania lags other states in fostering innovation and struggles to convert cutting-edge research and development at universities into high-paying jobs, according to a new study from the Brookings Institution, a Washington, D.C.-based think tank..
“State government has seemed to lack a clear commitment to innovation and has let its core innovation programs languish,” the report found. Pennsylvania’s spending on programs to support startup companies was cut by nearly two-thirds during the Great Recession, the report noted, and has never been fully restored.
“Other states and their governors have been all over this,” Mark Muro, one of the report’s authors, told Spotlight PA. “Pennsylvania has been somewhat overshadowed.”
Shapiro has outlined a plan for developing “innovation hubs” and directing the state Department of Community and Economic Development to help companies in those areas recruit workers and tap public and private sources of funding. He has also proposed increasing a state tax credit for companies investing in research and development and has identified robotics, biotech, and energy as three industries where Pennsylvania should be a national leader.
Mastriano has mentioned innovation far less, but told Spotlight PA that as governor, he would “work to ensure that Pennsylvania attracts the best and brightest entrepreneurs.”
Pennsylvania has the highest gas tax in the nation and with gas prices reaching record highs over the summer, many residents have been feeling the pinch.
In June, average gas prices in Pennsylvania peaked at just over $5 per gallon, according to data from AAA. Prices have since fallen but remain about 40 cents higher than this time last year.
Pennsylvania relies on gas tax revenues to maintain its vast, aging network of roads and bridges, which the state Department of Transportation says needs billions of dollars in upgrades and maintenance.
Mastriano says he would work with the legislature to cut the gas tax while maintaining funding for roads and bridges, although he did not specify where the extra money would come from. Last year, he sponsored a bill that would temporarily lower the gas tax by roughly 25% for six months and make up the lost revenue with federal pandemic aid and a one-time registration fee for hybrid and electric vehicles.
Shapiro, by contrast, argues that not all of the savings from cutting the gas tax would be passed on to consumers, since the tax is paid by fuel distributors rather than by drivers directly when they fill up. The Penn Wharton Budget Model, a non-partisan research initiative, looked at what happened when three states temporarily cut gas taxes earlier this year and found that between two-thirds and three-quarters of the savings were passed onto consumers.
Instead, Shapiro has proposed a gas tax rebate of $250 per vehicle — for up to four vehicles per household — for all residents, regardless of income. The Philadelphia Inquirer editorial board criticized this aspect of the plan, saying it would send “a disproportionate amount of money to the state’s top income earners.” “It’s a one-time payment to start,” Shapiro said at a news conference in March, according to a transcript shared by his campaign. “If we need to do it again and again, we will.”
Additionally, not all the money from the gas tax actually goes to pay for roads and bridges. Every year, hundreds of millions of dollars are transferred to help fund Pennsylvania State Police.
A report in 2019 by the state auditor general found that the $4.25 billion transferred since 2012 to State Police from the Motor License Fund — which provides about half of PennDOT’s budget — had delayed planned repairs. Last year, a state commission recommended ending the transfers, which would require the governor and lawmakers to agree on another way to pay for State Police.
Both candidates have said they support ending the transfers, but haven’t specified how they would replace the State Police funding.
Property tax relief
A popular state program that gives low-income older and disabled homeowners a partial refund on their property taxes received a one-time boost this year. Wolf said the bonus payments would help some of the most vulnerable Pennsylvanians as they face steep price increases.
But, as Spotlight PA reported, the number of people getting help from the program has been shrinking for years because the state legislature hasn’t updated the income limits for homeowners to qualify since 2006. Lawmakers from both parties have repeatedly proposed legislation that would address the program’s declining numbers, but those bills have mostly failed to advance in the legislature.
Shapiro has proposed raising the income thresholds for the rebate program to a level that would make an estimated 275,000 more people eligible and doubling the amount that many households receive. The expansion would cost roughly $400 million, according to his campaign.
Mastriano supported the one-time bonuses but argues that residential property taxes, which provide vital funding for local governments and public schools, should be abolished altogether. The property tax, he wrote earlier this year, “is like paying rent to the government for land you own.”
As a state senator, Mastriano introduced legislation that would eliminate property taxes for homeowners 65 and older who make less than $40,000 per year and have lived in Pennsylvania for at least a decade. The bill died in committee in 2019.
On his first day as governor, Mastriano says he would create a task force dedicated to eliminating property taxes for homeowners by 2024. Previous efforts to abolish the property tax have stalled in Harrisburg for decades because replacing the lost revenue for schools would require difficult tradeoffs like raising sales or income taxes, changes that many lawmakers have been unwilling to support.
Mastriano told Spotlight PA that while any property tax elimination bill would require some sort of revenue replacement, the first priority for his property tax task force would be identifying wasteful spending by state agencies.
In a radio interview in March, Mastriano said he hoped to eliminate property taxes without increasing other taxes by reducing the overall cost of public education. He proposed cutting state spending per student from $19,000 to roughly $10,000 and giving the money directly to students to use at the school of their choice. Mastriano has also suggested making up the revenue lost by scrapping property taxes, which would total in the billions, and levying a tax on private universities’ endowments, or charging a fee to international money transfers.
Spotlight PA is an independent, non-partisan newsroom powered by The Philadelphia Inquirer in partnership with PennLive/The Patriot-News, TribLIVE/Pittsburgh Tribune-Review, and WITF Public Media.
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