Shapiro’s Policies Will Sink PA's Economic Progress
A recent Politico article highlights a New Jersey candidate touting Pennsylvania as a better model for the Garden State. Meanwhile, a left-leaning economist’s tweet ranks Pennsylvania as the most recession-proof economy in the Northeast.
Of course, Gov. Josh Shapiro leveraged his $3 million PR team to try to take credit for a great economy.
But how strong is Pennsylvania’s economy really?
Pennsylvania’s outlook is improving and is far better than that of neighboring New Jersey. Yet, the data shows a middling economy, and the Keystone State lags well behind the leading states for growth and job creation.
Rich States, Poor States — a national report measuring economic competitiveness, curated by the American Legislative Exchange Council—ranks Pennsylvania at 36th in economic outlook. That’s significantly better than New Jersey (ranked 48th) and better a decade ago, but nothing to celebrate.
Likewise, Pennsylvania now ranks 34th in the Tax Foundation’s State Tax Competitiveness Index and a respectable 28th in state and local tax burden, an improvement from prior rankings. Again, Pennsylvania is well ahead of New Jersey (49th and 45th, respectively) on those same indices.
But a majority of voters say Pennsylvania is headed in the wrong direction, mainly because our mediocre rankings mean we are losing ground to the leading states.
Since February 2020, Pennsylvania has experienced an anemic 2.7 percent job growth. That contrasts with leading states of Utah and Idaho, along with key competitors Florida and Texas, which have seen job growth greater than 10 percent.
Since 2014, Pennsylvania ranks 41st, 34th, and 38th in personal income growth, job growth, and population growth, respectively — an improvement from prior decades, but hardly indicative of a robust economy.
Further, inflation continues to eat at wage growth. Adjusted for inflation, average weekly earnings for Pennsylvania workers declined 5% since 2021 — a loss of nearly $2,465 annually. In fact, the real median household income in Pennsylvania is lower than its 2019 peak.
Most notably, Pennsylvania loses residents to other states. According to the Census data, Pennsylvania lost 49,000 residents from domestic migration since 2020 and about 280,000 over the last decade. Pennsylvania lost residents to Florida, South Carolina, Georgia, Virginia, and Texas, while gaining from states like New York, New Jersey, and California.
The impact: Pennsylvania lost $16 billion in taxpayers’ income to other states since 2012, and it’s no consolation that New Jersey lost $31 billion.
To be clear, there are bright spots for Pennsylvania. In 2022, lawmakers passed tax cuts that reduced our corporate tax rate from the second-highest in the country to the 13th highest, with a phaseout that will rank us among the more competitive states by 2031.
Likewise, due to fiscal restraint, Pennsylvania went from the second-worst in the nation in emergency reserves—with only enough to run state government for a few hours — to near the national average. As a result, rating agencies have improved Pennsylvania’s bond ratings, meaning taxpayers will pay less interest on borrowing.
And Pennsylvania has become the number-one state for exporting electricity. Interestingly, Pennsylvania reduced carbon emissions even while expanding electricity generation.
But we’ve done this despite Shapiro — not because of him.
The business tax cuts began before him, and he’s failed to pass any further cuts. In fact, he’s pushed a convoluted business tax regime, called mandatory unified combined reporting, that he projects will increase corporate tax revenue by $1.1 billion annually.
Likewise, Shapiro’s budget proposal would create a $7 billion structural deficit, requiring a tax hike of more than $2,000 per family of four next year.
He also proposed reversing Pennsylvania’s progress on fiscal solvency and illegally draining the Rainy Day Fund, despite warnings from all three ratings agencies.
And the governor continues to pursue litigation to impose an energy tax on Pennsylvania families. Meanwhile, he also pursues new policies that would drive up energy costs by $157 billion over the next decade and discourage investment.
In short, Shapiro wants to imitate the policies of New Jersey, New York, and California, even while touting data showing how badly those states are performing.
Instead, lawmakers should follow the lead of states winning in migration and experiencing robust job and income growth, such as Texas and Florida.
This means controlling government spending to protect our reserves and prevent tax hikes on working families, reducing taxes and excessive regulation, blocking new energy taxes and mandates, and expanding educational choice.
Doing so can transform Pennsylvania into the leading state for opportunity and prosperity.
