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CEO/CFO Soundoff: Taxation with Too Much Representation

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By Michael Weber, president of Smith Provision Co., Inc.

Pennsylvania ranks high for the number of its legislators. We’re second highest in the nation, with 253 of them – 50 Pa. state senators and 203 representatives, more than twice the number of California, our most populous state, which has three times the number of residents. States with more residents than Pennsylvania have the following number of legislators – California (120), Texas (150), New York (150), Florida (120) and Illinois (118). Ohio is the seventh largest state in terms of population and has just 99 total senators and representatives.

Pennsylvania ranks high for business taxes too. It’s a factor negatively reflected in our low rating for favorable state business climates – 32 of 50 overall, 47 for comparative corporate tax rates and a last-place 50 for unemployment taxes!

We realized how bad of a position our state is in TaxWise when Smith Provisions built a new plant three years ago and met with economic development professionals. We learned that Pennsylvania doesn’t look good to outside companies, to site selectors and often to our own homegrown companies that are recruited constantly by other states. Smith’s is recruited all the time; moving is not something we’d consider, but companies that are more mobile, often do. According to the Tax Foundation, “evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth.”

Personally, I think there should be national legislation to eliminate the ability for any state to offer tax-based incentives. There should be a more level playing field. We’re picking state winners and losers instead of making a great business climate for all.

However, since that isn’t the case currently, it’s obvious we need to reform Pennsylvania business taxes. But how?

First, we should reduce the size and cost of operating our state government. While that step alone would not affect taxes overnight, it’s a logical start towards reducing government spending. Instead of raising taxes, reducing spending would enable state government to meet its obligations to education, transportation, infrastructure, etc. In business, you can’t look at raising prices first when things aren’t going well. You have to do everything you can to operate more efficiently.

Because we’ve squandered revenues that could’ve gone to roads and infrastructure, our infrastructure is crumbling. The government remedy? Former Governor Corbett raised fuel taxes. Now Pennsylvania can also boast, “We’re number one!,” with the highest state taxes on gasoline at 51.60 cents a gallon and the highest tax, at 64 cents a gallon on diesel fuel – the fuel many businesses use to transport their products.

I ask my fellow business leaders to talk directly to their state senators and representatives; call or make an appointment to discuss how to reduce spending and business taxes. With the second largest group of them among states, they should certainly have the time. We need to stand up for our businesses and our communities. We need to deal with the escalating pension costs now, not allow politicians to keep kicking the can down the road. And if they don’t do what we ask, they should be voted out – Republicans or Democrats.

In my opinion, revenue isn’t the problem; spending is. The responsibility for controlling it falls to Governor Wolf who seems to favor raising taxes in order to spend more, rather than operating government more efficiently. And I hope you would agree, that’s not very businesslike.