Pennsylvania Is Losing Businesses and Workers

Sadly, one of the nation’s biggest employers is closing in Pennsylvania. Saks & Company recently announced plans to shut down its fulfillment center in Foster, laying off 435 employees as an unfortunate aftermath. This follows on other recent closures and layoffs by Saks in Bala Cynwyd and Wilkes-Barre, which also resulted in the loss of another 200 jobs.

And though it is easy to point fingers at national and international trends, many of Pennsylvania’s economic woes are of its own making. Our commonwealth has what it needs to compete and attract businesses: a skilled workforce, abundant natural resources, geographic proximity to huge markets, etc.

Yet, Pennsylvania struggles to compete nationally. In its annual Rich States, Poor States, the American Legislative Exchange Council ranks Pennsylvania 36th in economic outlook and 44th in economic performance. The Tax Foundation ranks our commonwealth 36th nationally for tax competitiveness, dropping down two spots from last year’s rankings.

Pennsylvanians leaving for Florida, the Carolinas, and Texas are not just chasing warmer weather. Polling reveals that 55% of Pennsylvanians are leaving or considering leaving to find a lower cost of living.

So, how do we reverse course?

It all begins with the state budget. Every year, Pennsylvania lawmakers legislate not only how tax dollars are spent but also the policies and programs that guide the spending. And with the right reforms, Pennsylvania can start climbing back to being the economic powerhouse it once was.

Regulatory reform would be a great place to start. Our commonwealth has a terrible reputation for excessive red tape that discourages and is a barrier to business. Pennsylvania is the 14th-most regulated state, with more than 164,000 regulations on the books!

And even the slightest reduction in this regulatory burden would pay huge dividends. A Commonwealth Foundation study found that a 36 percent reduction in Pennsylvania regulations would generate more than $9.2 billion in new GDP spending and more than 180,000 jobs.

One way to chip away at Pennsylvania’s regulatory burden is the Regulations from the Executive in Need of Scrutiny (REINS) Act. The REINS Act would require legislative approval for any major new and costly regulation before it takes effect. States that have embraced similar commonsense reforms have seen real economic dividends. Florida, which passed the REINS Act in 2010, has become one of the leading states for domestic migration, economic growth, and job creation.

We made notable progress during last year’s budget when lawmakers adopted “deemed-approved” permitting. Now, if a state agency fails to meet a deadline for permit approval, the permit is automatically approved, allowing business owners to break ground on their new projects faster. 

We also must not legislate away our competitive advantage in energy production. Lawmakers in Harrisburg are considering counterproductive policies, such as the governor’s “Lightning Plan,” that threaten our commonwealth’s status as an energy powerhouse. If adopted, the Lightning Plan — a series of onerous carbon taxes and renewable energy mandates — would impose more than $150 billion in new energy costs over the next decade, jacking up utility prices on families and businesses already paying out the nose when their electricity bills come due.

Accelerating tax reform would also alleviate rising costs. Pennsylvania levies one of the highest corporate taxes nationally. In 2022, lawmakers passed a plan to reduce the corporate net income tax (CNIT) from 9.99% to 4.99% by 2031.

But this reduction needs to be fast-tracked. Even with today’s lower rate (7.49%), Pennsylvania still taxes at a higher rate than our neighbors in New York, West Virginia, Virginia, and Ohio. (In fact, the Buckeye State has no corporate taxes.) Accelerating the CNIT reduction would put us ahead of our neighbors, making Pennsylvania an ideal place to start a business or relocate.

Tax reform also requires the fiscal discipline needed to avoid new taxes. Pennsylvania’s Independent Fiscal Office has made a scary projection of  a $6 billion state deficit by fiscal year 2026–27, which fully exhaust our general fund and emergency reserves the following year. This fiscal crisis will result in a statewide tax hike of $2,100 per family of four. Given that half of Americans cannot afford a $1,000 emergency expense, this is a profound blow to the wallets of Pennsylvanians.

Business closures like Saks should serve as a wake-up call. Without genuine regulatory reforms or tax relief, Pennsylvania risks losing more jobs, businesses, and families to other states.

Adopting a fiscally responsible budget — complete with meaningful regulatory reform and tax relief — would sharpen and broaden the commonwealth’s competitive edge, invite more businesses, foster economic growth, and stop the hemorrhage of outmigration to other states.

Megan Martin, a former state Senate parliamentarian, is the Chief Operating Officer and General Counsel for the Commonwealth Foundation, Pennsylvania’s free-market think tank.