PA Budget Should Prioritize Economic Growth, Workforce Development

As Pennsylvania’s frontline leader for business growth, the Pennsylvania Chamber of Commerce and Industry's mission is advocating for policies to make the state the most competitive for business in America.

We appreciate that Gov. Josh Shapiro and the state legislature share many pro-growth goals that we have long touted. This year’s budget and legislative session present a clear opportunity to move the Commonwealth closer to realizing our boundless potential and send a clear signal that Pennsylvania is open for business.

Our organization has identified three key areas that we urge lawmakers to focus on in the 2023-24 legislative session to maximize job creation and economic growth: tax reform, improving state permitting, and workforce development.

Tax reform

Last year, we worked in a bipartisan manner with Democratic Gov. Tom Wolf and a Republican-led Senate and House to enact significant tax reform to finally lower Pennsylvania’s corporate net income tax rate (CNI) – then the nation’s second-highest.

Pennsylvania’s CNI is now scheduled to go down incrementally each year until it is cut in half by 2031. This was a critical and important first step. However, many other states are advancing more ambitious competitiveness policies, and Pennsylvania lawmakers should not stop pushing to make our Commonwealth better.

In fact, since 2021, nine other states have moved to reduce their own CNI, all of which already had CNI rates lower than Pennsylvania’s rate. Gov. Shapiro has repeatedly expressed support for accelerating the CNI reduction, and a legislative proposal to shorten the phase-down schedule by half, authored by Republican state State Sen. Ryan Aument, recently passed the Senate Finance Committee with bipartisan support.

Another factor limiting Pennsylvania’s tax competitiveness is the state’s harsh treatment of net operating losses (NOLs). This refers to the ability of a company to reduce its tax liability if it lost money in previous years, which is particularly critical for start-ups that frequently lose money in their early years. 

Federal law allows businesses to deduct up to 80% of their tax liability using losses from previous tax years. Currently, 19 states align with the federal rules, 25 states have no deduction cap at all, and four states have no corporate tax. Meantime, Pennsylvania is one of only two states that caps NOL deductions below the federal limit – in our case, by half.  If you were starting a new company, knowing start-up costs and investments would be challenging in the first year, would you choose to locate in Pennsylvania? Lawmakers seem to understand this policy needs fixing, and legislation authored by Republican state Sen. Greg Rothman recently passed the Senate Finance Committee unanimously.

Accelerating the CNI reduction and improving Pennsylvania’s treatment of net operating losses would help create a fairer tax system, unlock future growth, and make our state a more attractive destination for businesses seeking to establish or expand their operations.

Permitting reform

Permitting reform is another priority for many Pennsylvania employers and the Commonwealth’s economic productivity. Business and labor applauded Gov. Shapiro’s executive order and Republican state Sen. Kristin Phillips-Hill’s legislation to modernize and streamline our antiquated permitting process.  A strong, diverse coalition of stakeholders and bipartisan group of elected officials agree that the current permitting model is outdated, inefficient, and that Pennsylvania loses out on significant investment as a result.

The Pennsylvania Chamber developed a comprehensive permitting-reform framework that addresses several of the business community’s top concerns, and we led a coalition of 68 chambers of commerce and statewide business associations in calling on lawmakers to enact reforms this session.

S.B. 350, Sen. Phillips-Hill’s bill, recently passed the Senate with bipartisan support. The bill makes it easier for applicants to check the status of their permit applications, lays out a timeframe in which permit applications must be responded to or otherwise “deemed approved,” and provides for expanded use of third-party contractors to review applications. By building on the governor’s executive order to improve permitting, this measure further helps to modernize, streamline, and add much-needed transparency to the current process.

Workforce development

Building a skilled workforce is essential for sustained economic growth. The Pennsylvania Chamber’s multifaceted workforce-development strategy aims to bridge the job-skills gap and cultivate the next generation of talented workers.

This includes helping employers and employees overcome child-care challenges, improving the unemployment compensation system to facilitate Pennsylvanians’ return to work, and supporting workforce-development policies that foster skills training, education partnerships, and apprenticeship programs to meet employers’ needs in the 21st century economy.

It also includes criminal-justice reform measures that encourage reentrants or individuals with old criminal records to rejoin the workforce. One such measure up for consideration in the legislature would expand Pennsylvania’s bipartisan Clean Slate law, which automatically seals old criminal records, empowering individuals with the confidence to apply for jobs and providing businesses access to a new (and largely untapped) talent pool.

We urge policymakers to focus on these critical bipartisan areas during budget negotiations and work together to help unleash Pennsylvania's full potential. Together, we can pave the way to a more prosperous future.