THE SILENT KILLER

The Pennsylvania Manufacturers’ Association Tom Armstrong, Policy Director www.pamanufacturers.org

March 2003

Pennsylvania Manufacturing Employment 1991-2002 Source: Bureau of Economic Analysis, US Department of Commerce. 2002 preliminary data is from the Bureau of Labor Statistics (February 2003). 2002 employment is seasonally adjusted.

Pennsylvania Business Taxes Highest 2002 Business Tax Rates in America

Highest CSFT Rates Top Rate Highest CNIT Rates

West Virginia

Pennsylvania (2003)

Louisiana Arkansas Mississippi Tennessee Kentucky Alabama North Carolina 7.00 mills

6.99 mills

3.00 mills 2.70 mills 2.50 mills 2.50 mills 2.10 mills 1.75 mills 1.50 mills Iowa North Dakota

Pennsylvania

District of Columbia Minnesota Vermont Massachusetts Alaska (Tied) New Jersey (Tied) Rhode Island US AVERAGE (2002)* 0.75 mills (Tied) West Virginia US AVERAGE (2002)

* Calculated using PA's CSFT rate of 7.24 mills for 2002.

Note: Pennsylvania and West Virginia are the only states on both lists.

Top Rate

12% 10.5%

9.99%

9.975% 9.8% 9.75% 9.5% 9.4% 9% 9% 9% 6.64%

4 5 3 5 2 5 15 55 75 6 5

The Silent Killer…

Pennsylvania State & Local Government Spending 1970-2001 in billions

Local Spending Non-GF State General Fund Population Inflation line

( 10 mi l l i o n )

Growth of Inflation: Annual Average 5.1% State General Fund PA Population (in millions) $70.5 billion Local Gvt. Expenditures State Non-General Fund $43.6 billion $19.8 billion 12,281,054

70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00

Average Annual Increases, Total PA State Operating Expenditures vs. Inflation: 1980-2002 2% 1% 0% 8% 7% 6% 5% 4% 3%

6.7% 3.4%

Total State Operating Expenditures Inflation

6% 4% 2% 0% 14% 12% 10% 8% PA Change in Population Vs. PA Change in Government Employees 1990-2000

3.4% 11.7%

Population Government Employees Source: US Census Bureau

PA’S SLOW JOB GROWTH

Pennsylvania lagged national growth in almost every occupation.

Pennsylvania is expected to continue this trend…

…unless something changes

.

0 - 10 - 2 0 5 0 2 0 10 4 0 3 0

Services PA Employment Growth by Industry 1990-2000

P A U S

Retail Trade

-3.35

Wholesale Trade

-9.49

Finance, Insurance, & Real Estate Manufacturing Source: Bureau of Economic Analysis, US Department of Commerce

0 -5 -10 -15 35 30 25 20 15 10 5 Ser vi ces

Projected PA Employment Growth by Industry 1998-2008

PA US R et ai l T r ad e - 0.5% W ho l esal e T r ad e - 5.1% F i nance, I nsur ance, & R eal Est at e M anuf act ur i ng Source: PA Center for Workforce Inform ation and

THE SILENT KILLER

1.

2.

3.

4.

PA’s Poor Economic Performance: Slow economic growth High Government Spending & Taxation: Killing economic opportunity in PA PA’s Slow Job Growth: PA’s working age population will continue to seek opportunities in other states resulting in PA having stagnant population growth along with the 2 nd oldest population behind FL Reverse the Silent Killer: Government spending and taxation needs to be reduced for greater economic opportunity for PA’s job creators and citizens

TOP 10 RECOMMENDATIONS

10.Expand Keystone Opportunity 9. Retain the R&D Tax Credit by Repealing the Sunset Date & Cap 8. Reduce the Corporate Net Income Tax to 5.99% 7. Continue and Accelerate the Phase-Our of the Capital Stock and Franchise 6. Enact a Statute of Repose

TOP 10 RECOMMENDATIONS

5. Unemployment Compensation Reform 4. Place Caps on Non-Economic Damages of $250,000 or Less 3. Employer/Employee Restrictions Relief 2. Reduce and Change State and Local Annual Government Spending Bases on Economic Principles

TOP 10 RECOMMENDATIONS

And, one more needed economic reform in Pennsylvania: 1. ENACT TAXPAYER PROTECTIONS