Vision 2019 | Pennsylvania faring better than some neighbors on tax-cut impact, unemployment

HARRISBURG – Pennsylvania is on track to finish the 2018-19 fiscal year with $6 million left in the bank, according to projections by the governor’s office. This comes as tax revenue throughout the year consistently beat budget forecasts.

Through January, the state has brought in $957 million more than in it did over the same period in the previous year.

The state’s comfortable budget position is largely due to increased income and sales tax revenue due to economic growth, according to an analysis by the state’s Independent Fiscal Office.

The positive economic news wasn’t missed by Gov. Tom Wolf in his Feb. 5 budget address.

“A lot about our economy has changed. New businesses. New industries. New technology. New competition,” Wolf said. “And with all that, we have a need for new skills.

“Over the last four years, Pennsylvania has created more than 12,000 new businesses, and more than 239,000 new jobs. We’ve begun to match and advance beyond our neighbors. Now it’s time for us to really pull ahead.”

Pennsylvania’s unemployment rate in December stood at 4.2 percent. That’s better than neighboring states of Ohio (4.6 percent) and West Virginia (5.1 percent). But the state still trails its other neighbors, including New Jersey at 4.0 percent unemployment and New York and Maryland with 3.9 percent unemployment.

The state’s strong economic condition means that in much of the state, there are more job openings than job-seekers available to fill them, Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, said at an event promoting a new state command center focused on workforce development.

In January, there were 274,000 unemployed Pennsylvanians and a state count of online job postings found 262,569 openings, said Lindsay Barcale, a Department of Labor and Industry spokeswoman. The job openings count is almost certainly an undercount because it only captures job listings advertised online, she said.

While Pennsylvania may lag New York in terms of unemployment rate, the state’s budget situation appears much stronger. That’s largely because the impact of the 2017 Trump tax cuts won’t hurt Pennsylvania’s bottom line as much.

New York Gov. Andrew Cuomo has blamed the tax plan’s cap of a State and Local Tax Deduction of $10,000 for contributing to a $2.3 billion deficit in that state. Before last year’s tax changes, the average SALT deduction in New York was $22,000, according to the Tax Policy Center. For comparison, the average SALT deduction in Pennsylvania prior to the tax change was $11,000, according to the policy center.

While the tax change capped the SALT deduction, it also doubled the standard deduction to $12,000 for individuals and $24,000 for couples.

“In states where people have higher incomes and higher state, local and property taxes, the SALT limitation had a large effect on deductions,” said Jeffrey Johnson, a state Department of Revenue spokesman. 

“The effect of the SALT limit is likely to be more muted in Pennsylvania – as the state has lower income taxes and property taxes, on average, than many neighboring states.”