The PA Chamber achieved a monumental victory for its members last week with the passage of a significant tax reform package as part of the 2022-23 state budget agreement that includes the reduction of Pennsylvania’s Corporate Net Income Tax rate and notable tax relief for small businesses.
The CNI reduction was incorporated into the Tax Code bill that passed in conjunction with the budget bill. Pennsylvania’s current 9.99 percent rate – which stands as the highest flat tax rate in the country – will be reduced by half over the course of the next nine years, starting with a full 1 percent reduction in 2023 to 8.99 percent and phasing down incrementally each year by .50 percent until reaching 4.99 percent in 2031. Based on current state corporate tax rates, the full reduction will lower Pennsylvania’s rate to the sixth lowest in the nation by 2031.
Pennsylvania’s uncompetitive CNI has long served as a huge red flag for business investment and as such, lowering it to a more attractive level has been a decades-long policy priority for the PA Chamber. The PA Chamber is proud to have led the charge in seeing this moment realized, and the organization wholeheartedly thanks the 222 members of the General Assembly who voted for the legislation last week and Gov. Wolf who signed the bill into law last week.
In addition to the CNI reduction, other important tax reforms were achieved in the Tax Code that specifically benefit small businesses. This includes “like-kind” exchanges provision that lets employers dispose one asset and acquire another similar asset without generating a tax liability from the sale of the first asset. Notably, Pennsylvania was the only state in the nation that did not allow for this tax deferral at the state level. The PA Chamber also worked with lawmakers to approve a tax deduction for the total purchase price of qualifying equipment for those subject to personal income tax. By aligning state law and federal law under Section 179, small businesses can afford to make important equipment purchases that will improve their business operations.
In a press release following the General Assembly’s passage of the tax reform bill, PA Chamber President and CEO Luke Bernstein applauded state lawmakers and Gov. Tom Wolf for coming together and putting Pennsylvania’s economic future and its people first. “These tax reforms instantly make us more competitive and allow us to focus on Pennsylvania’s strengths as a hub of global commerce and opportunity – our prime location, world-class educational institutions, innovative workforce and more. We are proud to stand with the leaders of the House and Senate, Governor Wolf and other legislative champions of business who supported these vast improvements to our state’s competitiveness. This tax reform package, which was a top legislative priority for our organization for decades, is a major step towards showing that Pennsylvania is open for business and ready to chart a path toward a bright future for our state’s economy.”