In nearly every study of state-by-state economic competitiveness Pennsylvania ranks near the bottom. The most recent Keystone Business Climate Survey conducted by the Lincoln Institute found 53% of business owners and chief executive officers think our business climate is getting worse, only six percent think it is improving.
State government is doing everything in its power to prove them correct.
Two recent cases of regulatory excess and job crushing taxation illustrate the point. The first involves the ride sharing company Uber; the second is the vaping industry. Ride sharing and vaping have little in common aside from the fact both are being victimized by state government over-reach. Sadly, they are just the latest example of how public policy in Penn's Woods discourages business growth and job creation.
In the case of Uber it is an un-elected government regulatory agency, the Pennsylvania Public Utility Commission (PUC) that has levied an $11.4 million fine because the firm supposedly operated for six months without the appropriate license. I use the word supposedly because the Uber concept was so innovative it did not fit neatly into any existing regulatory category. What we have here is not a company flaunting the law, but a hyde-bound bureaucracy unable to keep pace with technological advancements.
Rather than work with Uber, the regulators flexed their muscle by issuing a cease and desist order — which Uber ignored. Uber thus committed the greatest of sins: failure to bow before the power of the bureaucrats. So out-of-bounds is the fine that Governor Tom Wolf and Republican legislative leaders urged the PUC to reconsider. Those folks don't normally agree on much, so their unity on behalf of Uber was striking.
For its part Uber remains committed to Pennsylvania. The company is testing a new driverless system in Pittsburgh. Apparently if such a system can navigate the circular roads, hills and bridges of the Steel City it will work anywhere. That research has brought much needed jobs to the southwestern part of the state — something the PUC apparently failed to take into consideration.
It's not just regulators who are crushing jobs; some legislators are doing their part. After splurging on $1.4 billion in new spending in this year's budget lawmakers went in search of the revenue to pay for their spending spree. Part of the answer was to impose a 40% tax on vaping stock.
Vaping is an alternative to smoking that utilizes what is in effect a personal vaporizer to turn vaping liquid or juice into steam. Such liquids can be infused with various amount of nicotine — or none at all — and has been known to help smokers quit using tobacco products. As vaping has become more popular mom and pop vape shops have sprouted across the commonwealth.
A 40% tax on any product or service is excessive, but in the case of the nascent vaping industry it is a killer. Since the tax is applied to any items in stock at the time the tax takes effect next month it will crush many if not most of the small businesses. For example, if a shop had $100,000.00 of vaping stock on hand they will immediately have to write the commonwealth a check for $40,000.00. For some that exceeds their annual profit margin.
The end result is one of the few industries available for first time or small entrepreneurs will close and disappear, or the industry will be dominated by a few larger operations capable of surviving the tax onslaught. The end result will be fewer small businesses, lost jobs and fewer choices for consumers. Oh, and those sales and personal income taxes paid by the vape shops, they go away too.
The General Election campaign is now underway with half of the state senate and the entire state house on the ballot. This is an excellent time for voters to demand their elected officials stop imposing job killing taxation on businesses and call upon them to reign in the power of regulatory agencies. Unless a stand is taken at the ballot box Pennsylvania has no hope of shedding its well-deserved reputation as an unfriendly place to do business.
(Lowman S. Henry is Chairman CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is firstname.lastname@example.org.)
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