Other State Taxes

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.

State Tax Reforms to Help Boost PA’s Presence in National, Global Markets

Last December, President Trump signed the Tax Cuts & Jobs Act into law, helping the nations’ business leaders realize the long-desired goal of a more competitive America.   It had been more than 30 years since the last time the U.S. implemented significant tax reforms, which had resulted in the loss of potentially billions of dollars in new investment and growth. The uncompetitive nature of the federal tax structure had repercussions for every state – but particularly for Pennsylvania, where the private sector already faces the highest effective Corporate Net Income Tax in the country at 9.99 percent.

Fortunately, the law quickly set into motion a new day for the state and the nation. In the short time since the Tax Cuts & Jobs Act has been enacted, hundreds of businesses have announced plans to re-invest their expected savings from the law back into their facilities and their employees in the form of higher wages and better benefits – a classic case on how the private sector improves outcomes for workers without being forced to through government mandate. 

As we see the benefits from the federal tax reforms continue to pay dividends across the country, the PA Chamber is focused on how we can also enact these same types of policy changes at the state level.  At the top of our members’ tax reform priority list is reducing the No. 1 red flag for would-be investors – our   9.99 percent Corporate Net Income tax rate. Pennsylvania is also among the only states to cap Net Operating Loss Carryforwards, and the PA Chamber is calling for the total elimination of that cap.   Most recently, we’ve been leading the call for passage of legislation that would allow for 100 percent bonus depreciation when employers file their corporate taxes (a provision that is included in the Tax Cuts & Jobs Act but was recently eliminated in Pennsylvania in a bulletin issued by the state Department of Revenue).  

Our tax reform priorities also include bringing clarity and predictability to the state’s Tax Code so that business leaders know what to expect when they choose to operate here; and protecting any industry from being singled out for tax hikes. 

On behalf of our broad-based membership, we are proud to be mirroring this effort at the state level and pushing for the comprehensive 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.

Pa. budget deadlock a short-term win for business?

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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.

While positive changes to the Commonwealth’s business taxes occurred over the last few years, other states in the US have made more significant improvements to their tax structure. As a result, the Commonwealth’s tax structure, which includes the highest effective corporate net income tax rate in the country, continues to impede our competitiveness.

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 and designed to make changes to the tax structure that are based on the principles of competitiveness, predictability, fairness and simplicity.

The Chamber supports specific tax changes that encourage companies to locate and expand in Pennsylvania, including:

  • Reduction of the Corporate Net Income (CNI) Tax rate;
  • Elimination of the net operating loss cap;
  • Administrative reforms that promote timely, efficient and independent tax dispute resolution.
  • Prohibition of contingent fee agreements for the collection of taxes and for unclaimed property audits.

Similarly, the Chamber opposes tax policy options that hinder a company’s ability to compete in today’s global market. Specifically, the Chamber opposes:

  • Unreasonable treatment of out of state companies;
  • Corporate taxable nexus of instate and out of state transactions based solely on economic activity;
  • Increases in the tax burden on pass-through entities;
  • Mandatory Unitary Combined reporting;
  • Throw back/throw out rules;
  • Changes that exacerbate tax pyramiding in the imposition of a sales and use or some other consumption tax;
  • Adoption of a new or expanded gross receipts or business receipts tax;
  • Reinstitution of the Capital Stock and Franchise Tax or adoption of a net worth tax;
  • Broad, subjective Department of Revenue powers;
  • Increases in the tax burden on targeted industries.