Tax Cuts Alone Won’t Make Pennsylvania a More Attractive Place to Live and Work

Pennsylvania has a $14 billion surplus and two competing visions of how to spend it.

Gov. Josh Shapiro (D) wants to increase government spending, with a proposed 2024 state budget that spends $3 billion more than the state takes in. Republicans in the legislature, on the other hand, want to cut taxes, returning some of that surplus to taxpayers and improving the state’s competitiveness.

Pennsylvania Senate Republicans—with the help of eight Democrats—recently passed SB 269 to reduce the state’s individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. and eliminate the locally assessed gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. (GRT) for electricity producers. (The companion bill, HB 2388, awaits a hearing in the Pennsylvania House Finance Committee.)