Last Thursday, PA Chamber Vice President of Government Affairs Alex Halper testified during a hearing of the Pennsylvania House Finance Committee, urging lawmakers to enact crucial business tax reforms. Halper’s testimony shed light on Pennsylvania’s significant challenges in competing with other states to attract and retain employers, emphasizing the need for pro-growth reforms to reverse this trend. 

Set against the backdrop of ongoing state budget negotiations, Halper cited a recent report from the U.S. Department of Labor ranking Pennsylvania as the fifth worst state in the country in terms of net firm migration. Halper touched on employers moving out of the state and said these factors indicate a bleak economic future for Pennsylvania unless immediate action is taken to improve the state’s business climate, including tax policy: “This is a disturbing trend that has long-term implications and must be addressed,” he testified. 

During the hearing, Halper shared the business community’s perspective on two proposals, House Bill 1482 and House Bill 1483, aimed at accelerating the corporate net income (CNI) tax rate reduction and increasing the cap on net operating loss (NOL) deductions, respectively. 

Halper commended the bipartisan efforts that led to significant tax reform in Act 53 last year. “These measures will make our state more competitive, incentivizing investment and job growth, and create additional economic opportunities in the Keystone State,” he said.  

Halper reported that nine other states have passed further reductions in their corporate tax rates since 2021 and counseled lawmakers to consider these developments in determinations about accelerating the phasedown of Pennsylvania’s CNI rate. “We are in perpetual competition with other states, who we know are moving forward on pro-business reforms as well.” Halper also emphasized Governor Josh Shapiro’s stated support for accelerating the reduction of Pennsylvania’s CNI rate faster than Act 53’s plan. 

Halper also addressed House Bill 1483, emphasizing the need to rectify Pennsylvania’s treatment of net operating loss deductions or, as he described, a “harmful tax on business start-ups.” He noted, “Pennsylvania is an extreme outlier when it comes to the treatment of net operating losses. We are currently one of only two states that cap NOL deductions below the federal limit of 80 percent of taxable income.”  

Halper highlighted the impact on start-up firms and businesses in cyclical industries, stating, “Fixing this flaw will promote future growth, provide more stability as businesses make long-term investment and hiring decisions, and make Pennsylvania more attractive to employers and entrepreneurs.” 

While these tax reform measures are being discussed amidst ongoing state budget negotiations, their fate in the final agreement remains to be determined. Halper’s testimony emphasized their significance for Pennsylvania’s economic future, urging lawmakers to build on bipartisan efforts and prioritize pro-growth initiatives. He highlighted the wide-reaching benefits of these reforms, such as incentivizing investment, stimulating job growth, and improving Pennsylvania’s overall competitiveness. 

As budget negotiations continue, the Pennsylvania Chamber of Business and Industry remains committed to advocating for their inclusion in the final agreement. These twin measures would significantly enhance Pennsylvania’s tax climate, make the Commonwealth more attractive for businesses, and better position the state for long-term economic growth. 

Halper’s full written testimony is available here.