Pennsylvania’s corporate taxes and tax rate continue to put the Commonwealth at a competitive disadvantage. Comprehensive reforms of and reductions in business taxes are necessary to stimulate economic development. Specifically, the PA Chamber supports eliminating the cap on Net Operating Losses, reducing the Corporate Net Income tax rate and bringing uniformity and clarity to Pennsylvania’s tax structure.
As the PA Chamber works to lead Pennsylvania’s economy out of the pandemic-related recession, there are policy prescriptions that we know would go a long way toward setting our state apart as a prime hub for business growth. Leading that list are reforms to Pennsylvania’s uncompetitive and overly complicated Tax Code, starting with the lowering of our 9.99 percent Corporate Net Income Tax rate that has long been a deterrent to would-be investors.
In the Tax Foundation’s 2021 State Business Tax Climate Index, Pennsylvania was ranked 27th among the 50 states for its overall business climate; a dismal 43rd in terms of corporate taxes and 40th when considering unemployment insurance taxes. The uncompetitive nature of the Commonwealth’s Tax Code was also highlighted in a study, “Pennsylvania: A 21st Century Code for the Commonwealth,” which was authored by the Tax Foundation and funded via a grant by the PA Chamber. One of the key findings of the report shows that Pennsylvania relies more heavily on corporate taxes as a revenue source than most other states.
That’s why the PA Chamber is advocating for elected officials to take a page out of the federal government’s book (which enacted a sweeping tax reform bill in 2017) and enact comprehensive tax reforms at the state level. In addition to the need for reducing the CNI – without any “strings attached” like mandatory unitary combined reporting – the PA Chamber is calling for the total elimination of the cap on Net Operating Loss Carryforwards.
On behalf of our broad-based membership, we continue to advocate that federal tax reforms be mirrored at the state level; while pushing for comprehensive tax policy changes that are needed to make Pennsylvania stand out as a world-renowned economic leader. Our line of communication is always open, so please feel free to contact us any time with your comments and suggestions on how Pennsylvania could become a more inviting home to companies of all sizes.
Few issues draw as much attention as state business taxes for companies seeking to locate or expand operations. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, and the long-term health of a state’s economy. Taxes on business have been found to be the most harmful to economic growth. If taxes take a larger portion of revenue, that cost is passed along to either consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value), or some combination of the above. Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.
The Chamber supports a thorough review and analysis of the current tax structure that includes dynamic econometric modeling. The process for review should be well-balanced in its representation of the business community with the goal of enhancing Pennsylvania’s competitive standing and adhering to the principles of sound tax policy – that, to the greatest extent possible, taxes should be simple, transparent, neutral, and stable, and that the best tax structure is one with a broad base and low rates.
The Chamber supports specific tax changes that encourage companies to locate and expand in Pennsylvania, including:
Similarly, the Chamber opposes tax policy options that hinder a company’s ability to compete in today’s global market. Specifically, the Chamber opposes: