DV Journal

Will Sen.-elect Dave McCormick be good for the Delaware Valley? The consensus is yes.

McCormick is part of a GOP surge across Pennsylvania last month, with voters electing former President Donald Trump, state Treasurer Stacy Garrity, Auditor General Tim DeFoor, and electing York County District Attorney Dave Sunday the next attorney general.

During the campaign, McCormick visited various businesses in the Delaware Valley, promising to help them and pushing back against his opponent Sen. Bob Casey Jr.’s claims that greedy businesses, rather than excessive government spending, caused inflation.

Guy Ciarrocchi, a political analyst and former Chester County Chamber of Business CEO, said, “Dave McCormick will be a refreshing voice for job growth—an especially good leader for the suburbs because we are home to so many start-up businesses and angel investors who support new job creators. Dave knows how government can help and harm businesses—from taxes to regulations. As a former chamber CEO, I know that having an experienced businessman who’s worked in companies large and small is perspective that’s truly needed in the Senate.”

Erik Telford, senior vice president of the Commonwealth Foundation, Pennsylvania’s free-market think tank, said, “Voters overwhelmingly cast their ballots based on pocketbook issues, sending a strong signal to policymakers that it’s time to rein in the cost-of-living crisis. Dave McCormick put inflation and the economy at the forefront of his campaign. And Pennsylvanians are now eager for him to deliver on his promises to bring fiscal responsibility to Washington, fight for lower taxes, and make energy more affordable.

“Given his background in the private sector, McCormick should understand that it’s not the role of government to pick winners and losers, but to preserve the free enterprise system – something he can accomplish by cutting red tape and removing the barriers to opportunities that are holding back too many small businesses and entrepreneurs,” said Telford.

Charlie Gerow, a Republican consultant and CEO of Quantum Communications, said, “Dave McCormick will be great for the Philly suburbs as well as the rest of the state. Sen.-elect McCormick has a keen understanding of policies that stimulate economic growth, and he’s passionately committed to pursuing them. The resulting rising tide will truly lift ALL boats.”

And even Democratic consultant TJ Rooney believes McCormick will help DelVal businesses.

“I don’t think there is any doubt that Sen.-elect McCormick will bring the mindset of an extremely successful businessman to the job,” said Rooney.

“It’s also no secret that businesses stand to gain under a second Trump term, especially considering many new senators wholeheartedly support President-elect Trump’s agenda.”

Telford added, “His commitment to unleash Pennsylvania’s potential as a leading energy producer will benefit the state’s economy while making energy more affordable for consumers across the commonwealth.”

A West Point graduate who served in Iraq, then earned a Ph.D. from Princeton, McCormick, 59, led a software company in Pittsburgh before he joined Bridgewater Associates, one of the largest hedge funds in the world, and was tapped as its CEO. McCormick also served in several roles in the George W. Bush administration, including Under Secretary of Treasury.

For an alternate viewpoint, see “Point: The ‘Year of the Strike’ Could Be a Turning Point for the Labor Movement.”

There’s no denying that unions notched impressive victories this year, including substantial increases in compensation for auto workers, actors, screenwriters, airline pilots and delivery drivers. Regarding work days lost, union strikes in 2023 were the largest in 40 years — big enough to affect the overall job market.

But it would be premature to declare a resurgence of the U.S. labor movement or to argue that most workers would have benefitted from one.

The historical trendline is unmistakable: In 2022, one in 10 U.S. workers belonged to a union, down from one in seven in 1996 and one in five in 1983, when the first comparable data were collected. The decline of union membership has been remarkably steady over the last four decades. Since 2000, the year-to-year change in the unionization rate has been positive only six times, and those small gains have quickly been reversed.

Moreover, the latest data show that unionization is increasingly concentrated in the government sector, especially local services like K-12 education and public safety. Only 6 percent of private-sector workers are union members.

Another sign that unions are a waning force in the labor market is that the union wage premium (i.e., how much more union members are paid than similar workers who aren’t represented by a union) has fallen sharply. Over the last decade-and-a-half, the union wage premium in the private sector has been slashed in half from about 25 percent to 12.5 percent — evidence that unions don’t exert the kind of influence at the bargaining table that they used to.

The erosion of union power is rooted not in Big Business union-busting but in broader economic forces: globalization, technological change (including automation), shifts in industrial composition, and the rise of the gig economy. Those trends aren’t likely to reverse themselves any time soon.

Whether you celebrate or mourn the decline of organized labor, remember two things. First, workers have a right to organize and advocate for themselves. This leads me to the second point: Unions like to position themselves as promoting the interests of all workers, but their priority is mostly their own members. Sometimes, that comes at the expense of other workers.

For example, although higher wages for union workers are nothing to scoff at, they should be weighed against their not-so-obvious effects on the economy. By keeping pay above competitive market levels, unions reduce the number of workers unionized companies are willing to hire, making it harder for outsiders to find a job. States with policies that favor unions consistently experience slower employment growth and higher unemployment rates than other states, even after controlling for a host of other factors.

Moreover, unions generally advocate for seniority-based pay and benefits, which makes it harder to reward effective young workers. Unions often block employers from adopting the most efficient production methods, undermining companies’ profitability and, in some cases, driving them out of business.

Rigid work rules imposed by unions can degrade organizational culture. One study surveyed thousands of American workers and found that those in unionized companies reported “reduced empowerment, less effective teamwork and less support for career development and advancement within the company.”

These things trickle down to consumers. Researchers have documented, for example, that product recalls are significantly more common at unionized workplaces than non-unionized ones, possibly because higher wages crowd out investments in technology upgrades that would improve product quality.

Although unions tout fairness in the workplace, my colleague and I have found a connection between strong union protections and hiring discrimination. States that give unions more power to recruit members and raise funds have 30 percent higher rates of hiring discrimination against older women compared to other states. These findings suggest that high union pay encourages employers to reject job applicants they might view as less productive.

This doesn’t mean unions need to be demonized for organizing out of self-interest, but it does mean more states should reconsider tipping the scales in unions’ favor. It also means most workers shouldn’t worry about unions’ weakening grip on the labor market.

Lower tax rates, more businesses, higher revenues. That’s the Pennycuick tax plan in a nutshell.

State Sen. Tracy Pennycuick said Pennsylvania is not attractive to new businesses. She aims to change the state’s tax code to fix that problem.

“We know you’re going to invest in Pennsylvania,” she wants business owners to know. “We’re going to help you.”

Pennycuick (R-Bucks/Montgomery) has been working with her colleagues to pass tax reform legislation in the state legislature since earlier this year. The Senate Finance Committee voted this month to advance Senate Bills 345 and 346, putting them before the full Senate for consideration.

The first, Senate Bill 345, would speed up the reduction of Pennsylvania’s corporate net income tax, bringing it down to 7.99 percent and then dropping it another point every January until it reaches 4.99 percent.

“Last year, we passed the corporate reduction tax,” Pennycuick told DVJournal. “But then it was going to take us another 10 years to get us to 4.99 percent. What this bill does is allow us to accelerate that tax cut.”

The passage of the initial tax cut led to what the Pennsylvania Independent Fiscal Office called “stronger than anticipated corporate net income tax” collections, spurring the Senate Finance Committee this month to push through the accelerated cuts.

“We know if we can cut corporate net income tax, that will increase our business tax,” she said. “It will also induce more companies to come to Pennsylvania and expand business in Pennsylvania.”

Prior to the reforms, Pennsylvania had among the highest state corporate tax rates in the country at 9.99 percent.

Senators said at the time of the bill’s introduction that a reduction in the state’s income tax “leads to better job opportunities, higher workers’ wages, and improved communities – all of which create family-sustaining jobs and attract and retain new talent.”

Senate Bill 346, meanwhile, would increase the state’s “Net Operating Loss” (NOL) carryover limitation. In a memorandum, senators said Pennsylvania “is one of only two states that does not permit businesses to carryover net operating losses consistent with the federal limit.”

“When you start a small business, and you have all that first-year debt, all that equipment, inventory—that’s hard on a small business,” Pennycuick said.

“If you can’t carry over those losses year-over-year, that’s tough,” she said. “You’re going to have trouble staying in business.”

The legislation will, over time, increase the NOL carryover limit from the current 40 percent to 80 percent, “bringing it in line with both the federal limitation and the limitations of 48 other states,” the senators said.

Economic warning signs have been flashing in Pennsylvania recently, with high taxes and poor job opportunities at the forefront of many residents’ concerns.

A poll by the Commonwealth Foundation last month found more than 40 percent of respondents have either thought about leaving, know someone who has left the state, or considered doing so. Among the top-cited reasons for leaving were the state’s high taxes and low job creation.

A WalletHub analysis in March found the state was the fourth-highest for taxes in the country, with residents paying nearly 30 percent more in state and local taxes than the average American household.

Further cost concerns have arisen as the state looks poised to adopt the Regional Greenhouse Gas Initiative, which a nonpartisan review found would cost taxpayers billions of dollars in the coming years.

Pennycuick expressed hope the bills would help drive down the costs of working in Pennsylvania, loosening government burdens on job creators and inducing more of them to set up shop here.

“That would make it a very business-friendly state,” she said. “Right now, we’re not very business-friendly.”

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