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Tom Wolf says he's the 'small business governor.' Pa. business groups aren't so sure.

September 14,2018 15:22

In the bigger picture, two of the state's largest business trade groups say Wolf's proposals and policies have created, or threatened to create, more burdens for small businesses. In some cases, Republicans blocked the measures from becoming law.and more »



Tom Wolf won the Democratic primary for governor four years ago with the help of campaign ads that depicted him as a benevolent employer who shared profits with workers.

So it's no surprise that Wolf, whose family owned a kitchen-cabinet company, is billing himself as "the small business governor," as one of his current campaign ads puts it.

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Wolf, running for a second term, is likely also trying to counteract one of his opponent's perceived strengths. Republican Scott Wagner, a former state senator who founded a waste-hauling company in York County, is selling himself as a self-made businessman who would "take out the trash" in Harrisburg.

The ad ran earlier this year in western Pennsylvania and started airing in Philadelphia last week. The Wolf campaign has reserved air time in Philadelphia through Sept. 17 at a total cost of about $450,000 over the two-week period, according to a media buyer. It comes amid Wolf's broader pivot to the middle: he has abandoned earlier calls for broad-based tax hikes, and reached a quick budget accord in June with the GOP-controlled legislature, avoiding a potentially damaging election-year fight over taxes and spending.

But has he lived up to the title in the ad?

Although the ad's two main claims are true,the 30-second spot belies the fact that the governor has often been at odds with the business community over his calls for higher taxes and more regulations.

The ad cites two chief accomplishments: creating a "one-stop shop" for small businesses and eliminating the capital stock tax, a levy on the value of a business's assets.

In February, the Wolf administration launched a website making it easier for new businesses to navigate the government bureaucracy. That won praise from business groups.

And in January 2016, the Capital Stock and Foreign Franchise Tax expired. The gradual phasing out of the tax, first implemented in 1844, began in the early 2000s.

"Where previous governors tried and failed to eliminate the capital stock tax, Tom Wolf got it done," the narrator says in the ad.

That's basically correct: the tax was originally scheduled to be scrapped by 2010. What the ad doesn't mention: Pennsylvania and the rest of the country faced significant economic headwinds amid the Great Recession.

In the bigger picture, two of the state's largest business trade groups say Wolf's proposals and policies have created, or threatened to create, more burdens for small businesses. In some cases, Republicans blocked the measures from becoming law.

For example, Wolf has proposed raising the state income and sales taxes. In Pennsylvania, about 80 percent of small businesses, known as pass-through companies, file their taxes on personal income returns, according to the National Federation of Independent Business.

Wolf has also proposed raising the minimum wage from the federal $7.25 an hour to $12. Some economists support a higher minimum wage, arguing that lower-paid workers spend a greater share of their earnings, thus stimulating growth.

However, businesses generally oppose government mandates like this, and the Pennsylvania Chamber of Business and Industry says Wolf's proposal would lead to job losses. The state's Independent Fiscal Office found a hike to $12 an hour, phased in over three years, would result in the loss of 33,000 jobs by 2021.

Business groups also pointed to a rule imposed by the Wolf administration following enactment of President Trump's tax law, the Tax Cuts and Jobs Act.

The federal law helped encourage investment by allowing businesses to deduct 100 percent of the cost of a new purchase — such as a new piece of machinery — in the first year it was put to use. Typically, such costs are deducted over time — a process known as depreciation.

But the state Department of Revenue announced in January that companies must include those costs in calculating their corporate income tax. The legislature passed a bill reversing part of that decision, and Wolf signed it into law in June.

"We don't know how much business was lost" in the interim months, said Rebecca Oyler, state legislative director for the National Federation of Independent Business, which represents 14,000 small businesses in Pennsylvania. "We weren't able to be competitive for investment."

The NFIB has endorsed Wagner.

Business groups are also irked by Wolf's proposal to overhaul the state's overtime rules. The governor wants to boost the minimum pay that certain workers would have to earn to be exempt from overtime.

Under current federal rules, employers must pay low-level managers and specialized workers $455 a week (about $24,000 a year) without having to pay overtime for extra hours. The Wolf administration's proposal would double that threshold to $921 a week (about $48,000 a year) by 2022.

Gene Barr, president and CEO of the state Chamber of Business and Industry, said he considered the rules more burdensome than those proposed by former President Barack Obama. The federal rules were struck down by a judge last year.

But Barr, co-chair of the governor's Middle Class Task Force, gave Wolf credit for acknowledging that the state needs to do more to improve workforce development.

The Wagner campaign said Wolf's policies had been "a disaster for Pennsylvania small businesses" and that Wagner was a "proven small business owner with a detailed vision to reduce taxes and regulations on employers."

The Wolf campaign said the governor had "held business special interests accountable to the people of Pennsylvania, fighting to make corporations pay their fair share and advocating for better wages and worker protections for all Pennsylvanians."

Multiple public opinion polls have found Wolf leading Wagner by double digits.

Christopher Borick, a political scientist and pollster at Muhlenberg College in Allentown, said Wolf wants to draw a distinction between supporting big corporations — like those he'd like to slap with a severance tax on natural gas drilling — and small mom-and-pop businesses.

As a little-known first-time candidate in 2014, "the first impression a lot of folks got of his identity was around" the jeep he drove in campaign ads "and the small business," Borick said.

"It's still part of his overall public image," he said.

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