Tag Archives: jobs

Memo to Reporters and Editors: A Close Look at Governor’s Tax Cut Plan

PA Budget and Policy Center, 4/10/13

Hidden deep within Governor Tom Corbett’s proposed 2013-14 budget is a plan to enact a 30% cut in Pennsylvania’s corporate net income tax rate over 10 years, along with a number of other tax policy changes, that when fully phased in will cost the commonwealth—conservatively—more than $800 million annually.

The new round of tax cuts come after two years of significant budget cuts and at a time when the commonwealth is having a difficult time meeting its current obligations. It comes on top of 12 years of tax cuts whose value has reached more than $3 billion annually. This includes the final year of the capital stock and franchise tax phase out, which will drain more than $300 million in the current fiscal year.

State tax revenue for 2012-13 is not meeting expectations. The current year surplus that forms the foundation for next year’s budget is dwindling, leaving a potential budget gap. Pension costs will rise over the next few years regardless of whether changes sought by the Corbett administration are enacted, putting added pressure on the budget. Long-delayed transportation infrastructure projects and public transit programs will vie for scarce dollars.

While tax reform would be welcome, this plan falls far short of that goal. It makes modest changes to improve tax enforcement but avoids addressing corporate tax loopholes. Legislation that took steps to close the Delaware loophole passed the House last year, indicating growing support for leveling the playing field for Pennsylvania businesses.

Governor Corbett’s tax cut proposal will cost hundreds of millions of dollars—shortchanging the schools, colleges, health care and infrastructure that are absolutely necessary for our economy to grow. Pennsylvania can ill afford a new round of corporate tax cuts.

The Governor’s tax cut plan will be the subject of a Pennsylvania House Finance Committee hearing at 9:30 a.m. on Thursday, April 11 in Room G-50 of the Irvis Office Building, State Capitol Complex. In anticipation of that hearing, I would like to lay out some of the shortcomings of the Governor’s plan and suggest a better course to achieve true tax reform that closes loopholes and improves accountability.

The Governor’s Tax Plan

* Reduces the corporate net income tax rate from 9.99% to 6.99% by tax year 2025. The plan continues the increase in the Net Operating Loss carry-forward for a maximum of $5 million and 30% after tax year 2015. A conservative estimate pegs the total cost of the proposal at $389 million by FY 2020-21 and $819 million when fully phased in. It puts the vast majority of the cost onto a future administration, as the bulk of the rate cut occurs after 2018.
* Changes reporting requirements for pass-through entities, which includes partnerships, limited liability corporations (LLCs) and sub-chapter S corporations. With the phase-out of the capital stock and franchise tax, these corporate entities may not file a tax return with the state (partners and individual owners are required to file individual returns). This plan would make certain types of tax filing mandatory for these entities, and a $50 fine would be imposed for non-compliance.
* Ends a loophole in the realty transfer tax, through which large property holders are able to avoid state and local taxes.
* Eliminates unused tax credits, including the Call Center Tax Credit and the Coal Waste Removal Tax Credit.
* Provides for a $5,000 deduction for small business startups and conforms with IRS rules for like-kind exchanges for personal income taxpayers.
* Provides clarification for sourcing of sales of services and intangible assets, more important now that Pennsylvania has moved to basing its corporate income tax solely on sales.

A High Cost Plan That Creates Few Jobs

The Corbett administration projects that its tax cut plan will create 18,000 jobs in 2025. This amounts to 0.3% of total state employment and is less than that the 20,000 jobs in education that have been lost since 2010 due to state funding cuts. It is unclear if the administration’s projections take into account job losses as a result of lost tax revenue and service cuts—which could make the net job gains even less than 18,000….

continue reading at PA Budget and Policy Center

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Filed under Economy, Labor, Tax, PA govt & politics

Whither the Workforce?

by DocJess, Democratic Convention Watch, 4/8/13

The workforce participation rate has fallen to 63.3%. It hasn’t been this low since the late 1970’s. Let’s look at some numbers. Below is a chart of the labor participation rate from 2003 to the present. (All data from BLS.)

Labor participation rate 2000

…Here’s the really scary part, which comprises the labor participation rate since 1948, when the BLS started keeping statistics.

Labor participation rate all

The rise over time is understandable. The 60’s, 70’s and 80’s saw a lot of women entering the workforce who would not have worked in prior times. In the 60’s and 70’s, this was primarily women who wanted to work, especially at vocations that weren’t traditionally “pink collar”. By the 80’s, as wages stagnated and manufacturing moved overseas, there became a need for two incomes to support a family. And then came the drop.

It’s not just the 2007-09 crash, it’s something more insidious. The labor participation rate peaked for the first four months of 2000 at 67.3%, and has been falling ever since. There are several explanations for some of the decrease, but not enough to explain all of it….

continue reading at Democratic Convention Watch

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Filed under Economy, Labor, Tax, Jessica Weingarten

The Big Stall

by Robert Reich, Robert Reich’s blog, April 5, 2013

Bad news on the economy. It added only 88,000 jobs in March – the slowest pace of job growth in nine months.

While the jobless rate fell to 7.6 percent, much of the drop was due to the labor force shrinking by almost a half million people. If you’re not looking for work, you’re not counted as unemployed.

That means the percentage of working-age Americans either with a job or looking for one dropped to 63.3 percent — its lowest level since 1979.

The direction isn’t encouraging. The pace of job growth this year is slower than its pace last year.

What’s going on? The simple fact is companies won’t hire if consumers aren’t buying enough to justify the new hires. And consumers don’t have enough money, or credit, or confidence to buy enough.

It’s likely Americans are beginning to feel the pinches of January’s hike in the payroll tax combined with the government budget cuts known as the sequester. Increases in gas prices haven’t helped. All are taking money out of the pockets of most people – whose job situation remains precarious. So they can’t and won’t buy much.

One indicator: Retailers cut their staffs in March — by 24,100.

Yes, the stock market has rebounded. But only a small portion of Americans are affected by the rebound. The richest 1 percent own 35 percent of all shares of stock; the richest 10 percent own 90 percent.

And, yes, housing prices have stopped falling, and construction of new homes has picked up. The construction sector added 18,000 jobs in March.

But the turnaround in housing isn’t because prospective homeowners have been able to get new mortgages. It’s because investors are buying or building homes to rent. And a buoyant rental market doesn’t make most people feel wealthier.

Perhaps the most disturbing aspect of all this is that we’re in the fifth year of a supposed economic recovery from the second-worst economic downturn of the past century, and we’re still not nearly back on track. Instead, we’ve had the most anemic recovery in history.

A Gallup survey released Thursday showed that the percentage of Americans holding full-time jobs has remained essentially unchanged over the past year. With 12 million people out of work and another 8 million holding part-time jobs who’d rather have full-time ones, this just isn’t nearly good enough.

We’re experiencing the burden of austerity economics and the continued scourge of widening inequality. Both are squeezing average Americans. Yet it’s impossible to have a buoyant and sustained recovery without a large and growing middle class.

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Filed under Economy, Labor, Tax

Offshore outsourcing: can it be reversed?

by Nathaniel Smith, Politics: A View from West Chester, 12/9/12

For as long as most of us can remember, our society collectively has been sending work and jobs abroad.

I just saw the holiday exhibit at the Brandywine River Museum, including the usual model train display. What struck me there this time, since I was mulling over my current topic, was that after World War II the US government encouraged the importation of model trains from Japan (some under American brand names), in order to help restore one small part of a defeated enemy’s economy. That was very nice of us. I suppose American importers got a good deal, the taxpayer probably helped, and US model train factories probably lost business and workers.

In the 1950′s I recall struggling along with my father to install in our front hallway a sliding closet door made in Japan. It was a real operational challenge and the instructions were virtually incomprehensible, clearly written by a Japanese worker with a spotty school background in English. Well, that situation evolved rapidly.

For a couple of decades now, Chinese imports (almost entirely cutting off the Japanese and subsequent Mexican sources) have had clear and fluent instructions. Our phone operators in India are trained to speak with American accents, and Dinesh is given a new customer service identity as Dennis. After all, this is globalization, which for us means that everyone should sound like us (or, at a minimum, they should make sense to us).

Will jobs that have been outsourced abroad ever return to the US? …

continue reading at Politics: A View from West Chester

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Filed under Economy, Labor, Tax, Nathaniel Smith