Thirdandstate.org's blog

PA Tax Loophole Bill a First Step, More to Be Done

A blog post by Chris Lilienthal, originally published at Third and State.

Pennsylvania Representatives Dave Reed and Eugene DePasquale rolled out legislation today that would take an important first step towards closing corporate tax loopholes in Pennsylvania.

Corporate tax loopholes have been a problem for a long time in Pennsylvania. They don’t create jobs but do drain needed resources from good schools, health care and infrastructure.

Representatives Reed, a Republican, and DePasquale, a Democrat, deserve credit for recognizing this is a problem and taking steps to address it.

The bill, however, takes a limited approach and leaves many loopholes open for companies to exploit. It should be strengthened to ensure that big profitable corporations cannot use other artificial means to shift profits out of state and dodge taxes.

Matthew Gardner of Citizens for Tax Justice tells Philadelphia Inquirer columnist Joe DiStefano that combined reporting would be a better approach to closing loopholes. Under combined reporting, corporate net income tax would be assessed against income earned in Pennsylvania from a parent company and all of its related businesses.

As Gardner says:

Even if you’re successful in closing one [loophole], you’re doing nothing to stop the emergence of additional loopholes. Combined reporting ends the Whack-a-Mole game by taking away the incentive for companies to artificially shift income from one state to another.

SOTU 2012: Community Colleges, Workforce Development, Taxes & Infrastructure

A blog post by Mark Price, originally published at Third and State.

The Pittsburgh Post-Gazette has a pretty good summary of the State of the Union.

Here is the full text of the President's speech, and Wonkblog has a version of the speech with only what they define as specific policy proposals.

What follows are our favorites from the speech.

Community colleges and workforce development:

Join me in a national commitment to train two million Americans with skills that will lead directly to a job. My Administration has already lined up more companies that want to help. Model partnerships between businesses like Siemens and community colleges in places like Charlotte, Orlando, and Louisville are up and running. Now you need to give more community colleges the resources they need to become community career centers – places that teach people skills that local businesses are looking for right now, from data management to high-tech manufacturing.

I want to cut through the maze of confusing training programs, so that from now on, people like Jackie have one program, one website, and one place to go for all the information and help they need. It’s time to turn our unemployment system into a reemployment system that puts people to work.

Taxes:

Must Reads: State of The Union, Stimulus and Austerity Economics PA Style

A blog post by Mark Price, originally published at Third and State.

Tonight President Obama will deliver his State of the Union Address to Congress. We are expecting the President to recommend an extension through the end of 2012 of extended unemployment insurance benefits and the payroll tax credit. It looks as though a major theme in the address — besides the catch phrase “built to last” — will be conventional policies aimed at reducing inequality, such as increased spending/tax credits for education and training.

Education and training are important and fruitful means of reducing inequality, but they fall well short of what's needed to reduce the degree of inequality we now face.  A more forceful step in the direction of reducing inequality would include raising the minimum wage and making it easier for workers to form and join unions. We don't expect to hear the President call for either of those changes.

The President will propose paying for his new initiatives with higher taxes on wealthy households. As with education and training, restoring some sense of fairness to the tax code is a laudable goal but longer-lasting reductions in inequality will only come from policies that allow the pre-tax wages of more Americans to rise as the size and wealth of our economy grows.

Manufacturing, energy, job training and middle-class growth will be the cornerstones of President Barack Obama's speech tonight as he takes to the nation's grandest political stage for the annual address on the state of the union, according to senior advisers.

PA Job Growth in 2011 and More Layoffs, Higher Property Taxes in 2012

A blog post by Mark Price, originally published at Third and State.

On Thursday, the Pennsylvania Department of Labor and Industry released data on employment and unemployment in December. Compared to the summer months, the top line numbers were good, with unemployment falling three-tenths of one percent to 7.6% (U.S. rate is 8.5%).

Nonfarm jobs were up 6,500, which is a pretty good number (we need to average 8,000 new jobs a month to get back to full employment in three years). Service-sector job growth in December was atrocious; the sector added just 300 jobs. Most of the month’s job growth was in durable goods, with manufacturing adding 2,600 jobs, construction adding 3,000 and mining adding another 600.

Those 3,000 construction jobs don't represent a sudden resurgence of the construction industry. As most of you are happily aware, December was quite warm; this meant construction activity in the month was above historical averages which shows up as job growth in the final numbers. The actual trend in construction employment is at best no or very slow growth.

The bottom line is that in the last 12 months, Pennsylvania added 59,200 jobs. That's fewer jobs than were added from December 2009 to December 2010 (63,900). The primary reason Pennsylvania added fewer jobs in 2011 than it did in 2010 is the loss of 19,800 jobs in the public sector.

Ann Belser at the Pittsburgh Post-Gazette has more on the job numbers.

The Debut of Pennsylvania’s Independent Fiscal Office

A blog post by Mark Price, originally published at Third and State.

Yesterday, Pennsylvania's new Independent Fiscal Office (IFO) held a conference to release its economic and budget outlook for the next five years (PDF).

The event included presentations from staff at the Philadelphia Federal Reserve, IHS Global Insight, the Bureau of Economic Analysis and the National Conference of State Legislatures.

Several of the presentations noted that Pennsylvania’s job growth weakened over the summer primarily due to substantial layoffs of teachers and other state and local workers. The director of the IFO, Matthew Knittel, very cautiously predicted that state and local layoffs are at an end.

Must Reads: Where Is the Shared Sacrifice?

A blog post by Mark Price, originally published at Third and State.

When the economy is as weak as it is today, the prudent approach to the state budget is a balanced approach that looks to cut spending and raise additional revenue. A Patriot-News editorial this morning points out that nonprofit groups providing services to victims of domestic violence and rape, as well as people with severe health problems, have been particularly hard hit by the last several years of budget cutting.

The last couple of years, especially 2011, have been tough ones because of state funding cuts, and this year might not be much better. As lawmakers and the governor look at another difficult budget — introduced in February — they need to think hard about what further reductions in funding to charitable groups will mean in communities across the state...

Some of the testimonials in the latest survey [by the United Way] show the grim reality for many people seeking help:

A shelter director said, “For the second year in a row, our shelter has turned away more battered women and their children than we were able to house, due to lack of beds.”

“We are unable to provide health center services as we were before. A nurse is only at the center 16 hours per week vs. 40 hours,” one service stated.

“We’ve had to tell people wanting to get their GED that they had to seek services elsewhere,” a provider said.

“Ms. Smith has ALS and needs a device to be able to communicate in her last days. However, she is on a waiting list to borrow the equipment she needs,” added another.

New Year, Same Old Economic Austerity

A blog post by Mark Price, originally published at Third and State.

From November 2009 to November 2010, Pennsylvania added 63,300 jobs. From November 2010 to November 2011, the state added just 51,000.

Wait, isn't that backwards? Nope. A weak economy, the end of federal Recovery Act funds and state budget cuts slowed the pace of Pennsylvania job growth in the most recent year.

The big question mark going forward is whether the pace of job growth in the Commonwealth will continue to lag the rest of the country. Key will be whether school districts continue to face large budget deficits.

The news out of Stroudsburg this morning suggests this is going to be another challenging year for the Pennsylvania job market.

Larger class sizes, staff reductions, eliminating elective courses for students or a wage concession are possible remedies to close a projected $9.8 million deficit in the Stroudsburg Area School District budget, said Business Manager Don Jennings.

As school districts continue to add people to the unemployment lines, the Corbett administration is looking to make the situation that much worse by adding costly new regulations to address a problem that doesn't exist. 

Regulations and Jobs

A blog post by Stephen Herzenberg, originally published at Third and State.

On Wednesday, WITF’s Radio Smart Talk hosted two anti-regulation advocates to explain why regulations are, well, bad. The listeners of the show who called in did a good job underscoring the critical importance of effective regulation and exposing the lack of evidence for the views of the show’s guests.

I tried to call in myself, but time ran out before I could join the discussion. Had my call been taken, I would have pointed listeners to the writing of Bruce Bartlett, a former high-level policy person in the Reagan and Bush administrations. In a column tellingly entitled “Misrepresentations, Regulations, and Jobs,” Bartlett points out that “no hard evidence is offered” for the claim that new regulations are holding back investment and job creation: “it is simply asserted as self-evident and repeated endlessly throughout the conservative echo chamber.”

Bartlett goes on to explain that “the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration. Lack of demand for business products and services is vastly more important.”

A Must Read: Inequality Matters

A blog post by Mark Price, originally published at Third and State.

A debate has been simmering in this country since the early 1980s about rising inequality, a debate aided by more powerful computers and readily available income data that labor economists use to analyze inequality trends.

The debate has oscillated between two camps — the first arguing inequality trends are troubling, the second arguing a combination of there is no rise in inequality and even if there were it is OK or even good (for the vitality of our economy, for example). The battle of ideas spurred new research using new datasets, but the debate always breaks down in the same way.

Part of the argument about inequality being OK has been that what matters is intergenerational mobility. As long as people born of modest means have the opportunity to vault into the top of the income distribution, the American Dream of widespread mobility is alive and well.

In telling this story, Americans often compare themselves favorably to class-bound Europe where, according to the standard narrative, millions toil generation after generation eating gruel under the jackboot of cheese-eating aristocrats. A New York Times story this morning provides fresh evidence that, well, actually there is less intergenerational mobility here in the U.S. than in Europe. The story even has some conservative voices suggesting maybe this is a problem. (Side note: could Rick Santorum maybe let Eric Cantor know about this problem?)

OK, here's a tough one. Now that we agree that the American Dream is on life support, what's the conservative plan to revive it?

Déjà vu All Over Again: Mid-year Cuts and a Budget Shortfall on Tap for 2012

A blog post by Sharon Ward, originally published at Third and State.

Governor Tom Corbett will announce a new budgetary freeze before the end of the year to help resolve what the administration expects to be a $500 million revenue shortfall, according to Budget Secretary Charles Zogby, who gave the annual mid-year budget briefing on Tuesday.

Secretary Zogby painted a grim picture, as expected. The current revenue shortfall of $345 million could grow even beyond the $500 million current estimate, according to Zogby, and growth in mandatory spending for pensions, debt service and the Department of Public Welfare (DPW) will contribute to a budget for 2012-13 that is short about $750 million.

The Commonwealth plans to resolve the revenue gap with additional cuts. The secretary did not anticipate having "any revenue options" on the table and said he would look for further cuts in "waste, fraud and abuse" in DPW, controlling growth in corrections spending, and scaling back capital spending to make up the difference.

He did acknowledge that the Governor would rather reduce prisons than schools or higher ed and that making cuts was not something the administration relishes — suggesting that the work advocates have done this year may be penetrating.

In a nutshell, the persistently anemic economy is hurting tax collections, and growth in 2012 will be lower than previously estimated, making the 2012-13 budget more difficult than one would expect coming out of a recession.

Secretary Zogby rightly identified areas of built-in growth that will contribute to a structural budget deficit moving forward.

No PA Marcellus Shale Fee for 2011

A blog post by Michael Wood, originally published at Third and State.

Another year has nearly come and go, and still Pennsylvania has no Marcellus Shale drilling tax or fee.

To refresh your memory, the state House and Senate seem to be engaged in a game of how low can you go with their competing shale plans.

Last month, the House approved HB 1950, taking Governor Tom Corbett’s approach to a drilling impact fee. It would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate.

The Senate, meanwhile, adopted SB 1100, sponsored by Senator Joseph Scarnati, raising $360,000 over the life of an average well, the equivalent of 2.2%.

A comparable well in Texas would raise $878,500 — five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100. Even an industry-supported drilling tax proposal from August 2010 would collect more than these plans.

Under both the House and Senate bills, drillers will pay less in Pennsylvania than they do in Arkansas, Texas, Wyoming and many other energy-rich states.

Now fast forward to this week. On Wednesday, the Senate amended the Scarnati plan into HB 1950 and sent it back to the House before adjourning for the rest of 2011.

Why kick the ball back to the House? StateImpactPA explains:

PA Economic Development Programs Rank 40th on Job Creation, Job Quality Standards

A blog post originally published at Third and State.

A new national study sizing up hundreds of state-level tax credit, cash grant and other economic development subsidies has some bad news for Pennsylvania.

The commonwealth scored a D and ranked 40th place among the states in the Good Jobs First report, Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs. Some of the five Pennsylvania programs reviewed by researchers lack job creation requirements and wage standards for workers at subsidized companies. None of the programs required companies receiving state tax dollars to provide health benefits to workers in jobs or facilities funded by the subsidy.

Researchers looked at Pennsylvania's Film Production Tax Credit, Job Creation Tax Credit, Keystone Opportunity Zone (KOZ) Program, Opportunity Grant Program, and Research and Development Tax Credit. Combined, these programs cost state taxpayers $181 million a year.

Learn more about the Pennsylvania findings here.

The Good Jobs First study confirms the Keystone Research Center’s 2010 study which found that nine major Pennsylvania business subsidy programs had low or no job quality standards.

Length of Unemployment at All Time High

A blog post by Sean Brandon, originally published at Third and State.

While the U.S. unemployment rate fell to a 32-month low of 8.6% in November, the average duration of joblessness hit an all-time high — 40.9 weeks. This number has more than doubled since the start of the Great Recession in December 2007. Nevertheless, it should come as no surprise amid lingering unemployment. There are four job seekers for every job opening these days.

With long-term unemployment at its historic worst, Congress must decide whether or not to continue federally-funded extended unemployment insurance benefits that are scheduled to begin phasing out at the end of this month

Should Congress fail to act, 281,000 jobless Pennsylvanians will lose their unemployment benefits between December and June, with the bulk of benefits expiring in the first quarter of 2012, according to the Pennsylvania Department of Labor and Industry.

This should concern each and every taxpayer because unemployment insurance serves two vital purposes.

First, these benefits go to individuals and families who have suffered through the longest and deepest economic downturn since the Great Depression. As a society, the more fortunate have a moral obligation to help the less fortunate in their time of need. The money is being spent on necessities like rent, utilities, food, and clothing — not Cadillacs.

Corporate Tax Dodging in the 50 States

A blog post by Chris Lilienthal, originally published at Third and State.

PA Liquor Privatization Findings Too Good to Be True

A blog post by Stephen Herzenberg, originally published at Third and State.

The privatization of Pennsylvania's wine and spirits shops will not do much for state revenues but will usher in alcohol-related social problems.

Those were the key takeaways offered by researchers working with the Keystone Research Center at hearings of the Pennsylvania House Liquor Control Committee last week in Philadelphia.

University of Michigan researcher Roland Zullo, who has worked with Keystone on privatization issues, presented the results of his analysis of a pro-privatization study commissioned by Governor Tom Corbett's Budget Office. As Zullo's written testimony shows, the study, performed by Public Finance Management (PFM), was very open about its assignment: show how privatization will maintain annual wine and spirits revenue for the state, while maximizing upfront fees from privatizing.

As Roland shows, this is an impossible assignment. Consequently, PFM was forced to make implausible and incompatible assumptions. To maintain revenue neutrality, PFM assumed very high taxes on wine and spirits, a high annual fee from franchisees, and low price markups by private wholesalers and retailers.

These same assumptions, however, would make wine and spirits franchises a dud as a business opportunity - companies would make low profits or lose money, and they sure won't give the state a big upfront check for the right to lose money. As Roland said, "I can't square this circle."

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