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While PA Chamber members are urging state lawmakers to demonstrate fiscal restraint in crafting a new state budget in the face of a staggering $3.2 billion budget deficit, Gov. Ed Rendell announced a new plan to "temporarily" increase the Personal Income Tax from 3.07 percent to 3.57 percent.

Doing so would harm families and small business at the worst possible time.

Economic models* predict that the 16 percent PIT hike proposed by the governor would cost 24,000 jobs and would have a projected economic impact of taking $1.5 billion out of the private sector.

"Raising taxes is the wrong thing to do during a recession," stressed Gene Barr, PA Chamber vice president of government and public affairs. "Nobody likes to talk about budget cuts, but just as families and businesses have had to make sacrifices in their budgets, so too must government."

PA Chamber members believe that reducing spending must be a priority as the Commonwealth’s fiscal challenges are certain to extend beyond the 2009-10 fiscal year. Most economists agree that economic recovery will be slow, meaning a return to robust revenue projections is not likely in the near future. Implementing a supposedly temporary three-year tax increase to take care of anticipated shortfalls takes emphasis away from where it needs to be – creating a government that lives within its means.

PA Chamber members caution against other tax increases being proposed by the Rendell administration and some state lawmakers, saying they will hinder economic recovery.

Particularly now, Pennsylvania must take steps to spur business growth and job creation. Raising taxes is not the answer. Fiscal restraint and across-the-board sacrifices now will ultimately help better position the Commonwealth coming out of the recession and into the future.

*Source: The Commonwealth Foundation