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HARRISBURG, PA – The Pennsylvania Chamber of Business and Industry said that the tentative budget agreement reached by state legislative leaders, while not perfect, reflects today’s economic realities by requiring state government to live within its means.

"We are obviously disappointed that the tentative budget would increase the Capital Stock and Franchise tax," said PA Chamber President Floyd Warner. Under the proposal, the CSFT would revert back to 2008 level of 2.89 mills retroactive to Jan. 1, 2009. The 2.89 rate would be effective through 2011. The change would amount to $373.9 million this fiscal year and $550.6 million in 2010-11.

"However, the budget does include some additional progress on two of the unified business community's top business tax priorities," Warner noted.

The budget would increase the cap on Net Operating Loss Carryforwards from $3 million or 12.5 percent of taxable income to $3 million or 15 percent in 2009 and $3 million or 20 percent through 2013; and would change the Corporate Net Income tax apportionment formula from 70 percent sales, 15 percent property and 15 percent payroll to 85 percent sales, 7.5 percent property and 7.5 percent payroll. The formula would then become 90 percent/5 percent/5 percent in 2010-11.

"Lawmakers from both sides of the aisle at least recognize the value of these tax changes to the Commonwealth's overall job creation and economic growth efforts," Warner said.

And unlike 1991, when a $1.2 billion revenue deficit required a multi-billion dollar tax hike primarily on the backs of business in order to pass the budget, Warner said lawmakers demonstrated fiscal restraint by proposing to spend less than the prior fiscal year.

"Chamber members have said all along that just as businesses and families have done, government too must tighten its belt in these difficult economic times," he said.

Other positives for businesses of all sizes: several taxes and related proposals the PA Chamber fought against are excluded from the tentative agreement. They include a proposed 2 percent broad-based tax on all health insurance plans in the Commonwealth, which would have increased the cost of health care; and an increase in the Personal Income Tax, which would have hurt small businesses and individuals.

"Given the substantial fiscal challenges facing the Commonwealth this budget cycle, the pressure from many in state government for more spending and higher taxes, and memories of 1991 still fresh on our minds, business and individual taxpayers faced a potentially disastrous scenario," Warner said. "The PA Chamber commends lawmakers who stood up for fiscal restraint and developed a sustainable budget."