One of the big advantages Conrail had, was the legal authority to negotiate new labor agreements & eliminate much unneeded staffing, both in operations & in support services. Penn Central might have survived longer with the same labor agreements in place that CR enjoyed.
State taxes were indeed another big issue. The Jersey Central formed The Central RR of Pennsylvania in an attempt to separate some of their operations from New Jersey's sky - high state property taxes. High New Jersey taxes & lack of subsidies forced Erie Lackawanna to post discontinuance notices for ALL commuter rail services, just to get the state's attention.
Reading suffered from the same 'Anthracite Disease' as E-L & Lehigh Valley. RDG also had it bad due to lack of a 'long haul ' to Chicago ( PC / E-L ), or even Buffalo ( PC / E-L / LV ). RDG was also the mistreated stepchild of a bigger RR,( B&O ), just as E-L was with N&W & LV with PC.
Erie Lackawanna was in trouble long before Hurricane Agnes blew through the Northeast in 1972. In its' 16 year history, 1960 to 1976, Erie Lack-o-Money only turned a profit in 3 years as I recall. E-L also had merger denial among the employees, almost as bad as PC. While Lackawanna was the better managed RR, ex-Erie personnel often garnered the top operations positions due to nepotism. Lots of infighting.