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LVEDC Urges Strong Opposition to Job-Killing Warehouse Tax

By Colin McEvoy on September 29, 2017

The message below was sent on Sept. 29 to the Lehigh Valley legislative delegation by Don Cunningham on behalf of the Lehigh Valley Economic Development Corporation (LVEDC):

It has come to our attention that a new sales and use tax on warehouse services is under consideration as a part of a final revenue package to close the Commonwealth’s FY 2017-18 budget gap. The Lehigh Valley Economic Development Corporation is strongly opposed to this tax, which, if enacted, could have an extremely negative effect on the fastest-growing sector of the Lehigh Valley economy. We urge legislators in the Lehigh Valley delegation to strongly oppose a tax on warehouse services.

The transportation and warehousing sector currently employs about 29,000 people in Lehigh and Northampton counties, an increase of 11,000 jobs in the last five years alone. Within that sector of our regional economy, the warehousing and storage subsector has grown to employ more than 16,000 people, reflecting an annual percentage change of about 14 percent over the last five years.

The Lehigh Valley’s industrial real estate inventory has grown to more than 115 million square feet. The demand for logistics space is a primary factor in why the Lehigh Valley has the second-highest growth rate in the world for industrial property rents, according to a report by the international industrial real estate firm CBRE.

A tax on warehousing services would be job-killing. A Penn State University study estimates such a tax would result in the loss of more than 9,000 Pennsylvania jobs. The impact on the Lehigh Valley would be significant as well, as transportation and warehousing contributes $1.9 billion to the region’s 2016 GDP. That represents a 9.5 percent increase from the previous year. No other sector of our diverse economy is growing faster.

Please note that only five states impose sales and use taxes on warehouse services: Hawaii, Mississippi, New Mexico, South Dakota, and West Virginia. The contribution to GDP from transportation and warehousing in those five states combined is less than 60 percent of Pennsylvania’s $23 billion transportation and warehousing GDP. In addition, two states have repealed warehouse services taxes: Michigan in 2007 and Minnesota in 2014. In Minnesota, transportation and warehousing GDP has increased by more than $1.3 billion since the tax was repealed. Out of all states that have considered imposing this tax in the past, 90 percent have either decided against it or repealed it after passing it.

For the good of the economies of both the Lehigh Valley and Pennsylvania, please act aggressively to oppose any commercial storage tax as part of the Commonwealth’s final revenue package for FY 2017-18.

NOTE: After the above message was distributed by LVEDC, the Pennsylvania Economic Development Association (PEDA) has also voiced opposition to the tax.

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