Are Pennsylvania's Taxes Too High? No.

Eileen McNulty
Stephen Herzenberg
Publication Date: 
October 1, 2003



Contrary to conventional wisdom, the total amount in taxes that Pennsylvania businesses pay to state and local governments is not high when compared with other states.

  • Even before the most recent spate of tax cutting, in only 23 states did business pay a smaller share of all taxes than in Pennsylvania.
  • Based on 1995 data, Pennsylvania businesses paid $940 per capita in state and local taxes, 17th highest out of the 50 states but less than the $962 average for all states.
  • A 1999 study found that, for typical manufacturing firms, Pennsylvania had the second lowest business taxes in a group of 10 mid-Atlantic and southeastern states.
  • In 2001, Pennsylvania’s ranking based on a subset of business taxes that are relatively high in the Commonwealth dropped from fifth highest to 15th highest, according to Census Bureau data.

The impression that Pennsylvania has high business taxes has been created, in part, by recent studies sponsored by business organizations. When making comparisons between business tax burdens in Pennsylvania and other states, these studies have failed to consider all taxes businesses pay. Specifically, the studies have ignored property and sales taxes.   Table 1 provides a point-by-point discussion of the claims in the most recent business-sponsored study.

Whatever the level of Pennsylvania business taxes, research shows that low business taxes are not the key to rapid job growth. One reason is that lower taxes can deprive states of revenues necessary to invest in educational and infrastructural services that help attract or expand businesses.

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