Business leaders optimistic on growth, wary of more taxes, spending from Wolf

While the Pennsylvania business climate is warming, business leaders still cautioned the potential negative effects the state could face under new governmental leadership.

In a candid conversation, the House Majority Policy Committee, chaired by Rep. Kerry Benninghoff, R-Bellefonte, welcomed business association leaders as well as Centre County businessmen to give their thoughts on the economic climate of the commonwealth.

The policy committee includes Benninghoff, Rep. Cris Dush, R-Indiana and Jefferson; Rep. Adam Harris, R-Franklin, Juniata and Mifflin; Rep. Judith Ward, R-Blair; Rep Donna Oberlander, R-Armstrong, Clarion and Schuylkill; and Matt Gabler, R-Clearfield and Elk.

The meeting was hosted at the Pennsylvania Match Factory, itself the host of 13 businesses, American Philatelic Society Executive Director Ken Martin said.

The economy and employer base in Pennsylvania is very diverse, Chamber of Business and Industry Government Affairs Director Alex Halper said. While it’s one of the strengths of the state, it creates challenges in gauging the perspective of employers and how businesses view the economic climate in the state.

The chamber surveyed 652 employers on the climate of business, he said, with a majority being small businesses of 20 or fewer employees. What they saw were some of the highest numbers in years.

“Fifty seven percent ranked the climate as excellent or good,” he said. “While the feedback was positive, they were cautiously optimistic.”

The state isn’t seeing a number of employers making investments and hiring yet, he said. The concern is that the progress made over the last few years could potentially be halted or rolled back.

Small businesses represent every sector of the Pennsylvania economy, National Federation of Independent Businesses state legislative director Neal Lesher said.

Ninety eight percent of businesses in the state employ 100 or fewer workers, he said, while 80 percent report their business earnings on their personal income tax.

“Despite their importance to the Pennsylvania economy,” he said, “small businesses tend to be more heavily burdened due to their size.”

According to Gov. Tom Wolf’s budget proposal, he said, spending will increase by 16 percent — a $4.7 billion increase, which includes $1.3 billion on education, $100 million on subsidized child care and $160 million for state universities.

In order to pay, the budget proposes tax shifts and increases, he said. Personal income tax will increase from 3.07 percent to 3.7 percent, and sales tax is expected to rise from six percent to 6.6 percent. For the small businesses reporting as personal income, that means a larger chunk taken out of profits.

It’s fundamentally unhealthy for the commonwealth for the government to grow faster than the private sector economy, Pennsylvania Manufacturers’ Association President David Taylor said. As businesses improve over time, more people are going to work and the revenues to the state government grow organically to meet the needs of the public services.

“Even Ed Rendell, who managed to decrease the general fund balance by a billion dollars year after year over eight years; his spending increase was an average of four percent,” he said. “Of course, during the last four years Gov. Corbett and the General Assembly kept spending by one percent each year.”

Taylor called for tax relief, saying a state corporate income tax of 9.99 percent is the highest flat tax in the nation. The U.S. now also has the highest national corporate tax of any nation, he said, making Pennsylvania the most expensive place on earth for a corporation to do business.

“I just want it to be sensible and survivable,” he said.