Last week, the PA Chamber led a coalition of more than 50 local chambers from across the Commonwealth to send a letter to the General Assembly calling for a significant reduction in the state’s Corporate Net Income Tax.
The state’s excessively high CNIT has long been a red flag to potential investors. At 9.99 percent Pennsylvania has the unfortunate distinction of having the highest non-graduated CNIT rate in the country. The letter to state legislators noted that studies have shown that a reduction in the CNI tax rate would increase GDP, boost wages, raise home values, create family sustaining jobs and attract and retain new talent.
“The reality is, Pennsylvania’s excessively high CNI Tax rate has always detracted investment, resulting in billions of dollars in lost revenue and driving companies and job opportunities to other states,” said PA Chamber President Gene Barr in a press release publicizing the coalition letter. “As we collectively look towards our long-term, post-pandemic recovery, reducing the CNI is a critical step toward improving the Commonwealth’s overall competitiveness and putting us on the path toward a prosperous economic future.”
A CNIT reduction has been gaining traction over the past several months with legislators from both sides of the aisle agreeing the high tax rate needs to be addressed to improve the Commonwealth’s overall competitiveness. Proposals have been introduced in both the state Senate and House of Representatives that would lower the Commonwealth’s CNI Tax rate. In his 2022-23 budget proposal, Gov. Tom Wolf also called for an immediate rate reduction to 7.99 percent with a gradual reduction in the rate over the course of 5 years.
An important consideration in the CNIT discussion is the state’s overall finances, both near- and long-term. Last week, the state’s Independent Fiscal Office revised its revenue projections for the current fiscal year, noting that General Fund revenues are expected to come in at $48 billion by the end of June – nearly $6 billion above the prior year’s receipts. However, according to the IFO’s initial revenue estimate for the 2022-23 fiscal year, General Fund revenues for the upcoming fiscal year are projected to drop 11.5 percent to $42.26 billion.