Home   |   Taxes State

Media Tags: Taxes State

PA Chamber Applauds Senate Finance Committee for Advancing Pro-Growth Tax Bills

HARRISBURG – The Pennsylvania Chamber of Business and Industry today applauded members of the Senate Finance Committee for advancing two tax reform bills that will enhance the state’s business competitiveness and support economic growth.

Senate Bill 207 accelerates the reduction of Pennsylvania’s Corporate Net Income (CNI) tax rate to four percent by 2026, improving the Commonwealth’s ability to attract investment and create jobs. Separately, Senate Bill 473 restores the vendor discount for businesses that collect and remit sales tax, helping small businesses offset their costs.

“These bills are a win for Pennsylvania’s economy,” PA Chamber Senior Vice President of Government Affairs Alex Halper said. “A lower CNI makes our state more competitive and encourages job growth, while restoring the vendor discount provides much-needed relief for businesses facing rising costs. We urge lawmakers to move swiftly in advancing these commonsense, pro-business reforms.”

PA Chamber LTE Pushes Back on Combined Reporting

The Pittsburgh Post-Gazette recently published a letter to the editor from PA Chamber Director of Government Affairs Neal Lesher correcting misconceptions about Pennsylvania’s tax structure and the impact of mandatory combined reporting on businesses.

Full text of the letter is shown below.

 

 

Letter: No loophole

by Neal Lesher | Pittsburgh Post-Gazette

The Post-Gazette’s recent editorial, “Shapiro corporate tax plans are a good starting point to avoid budget blues” (Feb. 16), overlooks key facts about Pennsylvania’s tax structure and the real impact of mandatory combined reporting.

The so-called “Delaware loophole” was closed more than a decade ago when the General Assembly authorized the Department of Revenue to add back to business’s tax liability any interstate transactions made for tax avoidance.

Since then, multiple reforms — like federal tax law changes in 2017 and bipartisan state tax reforms in 2022 — have expanded Pennsylvania’s corporate tax base by hundreds of millions of dollars. In fact, corporate net income tax collections have surged, up 92 percent in just the past five years.

Additionally, mandatory combined reporting wouldn’t create the sort of revenue windfall proponents claim. A 2010 National Conference of State Legislatures study found no evidence that combined reporting increases tax revenue. More recent studies in Maryland, Indiana and Virginia show that it can actually reduce revenue or create unpredictable swings.

Meanwhile, the complexity of compliance would discourage multi-state firms from investing in Pennsylvania.

Instead of making our tax system more burdensome, lawmakers should build on recent bipartisan reforms that lower rates and simplify compliance — proven ways to make Pennsylvania more competitive for job growth and investment.

PA Chamber Leads Statewide Coalition Calling for Elimination of Pennsylvania’s Start-Up Tax

HARRISBURG – Today, the Pennsylvania Chamber of Business and Industry led a coalition of more than 70 chambers of commerce across the Commonwealth in calling on Governor Josh Shapiro and members of the General Assembly to improve Pennsylvania’s economic competitiveness by eliminating the state’s tax penalty on start-up businesses.

In a letter addressed to the governor and legislative leaders, the coalition highlighted the urgency of improving Pennsylvania’s tax treatment of Net Operating Losses (NOLs).

The coalition cited the negative impact of Pennsylvania’s current business tax and regulatory climate, noting that the state ranks among the worst in the nation for job seekers and key economic indicators. The Kauffman Foundation recently identified Pennsylvania as having the lowest rate of new entrepreneurs in the entire country.

“Governor Shapiro and leaders in the House and Senate have each acknowledged the need to improve Pennsylvania’s economic competitiveness,” the letter reads. “Improving the treatment of Net Operating Losses is a major step towards this goal. Pennsylvania’s 40 percent cap on NOLs is one of the most restrictive in the nation, hindering start-ups and cyclical businesses.”

The coalition emphasized the importance of increasing the cap on NOL deductions, which allow businesses to offset their tax liabilities with previous losses, as a means to attract more employers and reduce hurdles to entrepreneurship and business growth.

Net operating loss reform has emerged as a bipartisan priority in both the state House and Senate. The letter points out that 24 states have no cap on NOLs, while Pennsylvania is one of just two states that caps NOL deductions below the federal limit of 80 percent of taxable income.

“We appreciate the many proposals that policymakers and advocates have put forth to spur Pennsylvania’s economy and urge lawmakers to focus on competitiveness,” the letter continues. “We urge you to prioritize correcting Pennsylvania’s treatment of start-up businesses so the Commonwealth can compete on an equal playing field to attract entrepreneurs, new employers, and the jobs, economic development, and prosperity they bring to communities.”

Full text of the letter is available here.

3 immediate changes Pa. needs to fix its economy

by STATE REPS. ZACH MAKO, ROBERT LEADBETER, and TOM JONES

To be frank, Pennsylvania’s economic outlook is grim, with recent rankings placing our home among the worst states in the nation for job prospects and key economic indicators.

A recent WalletHub assessment pegged Pennsylvania as the fifth worst state to find employment, while analyses from U.S. News and World Report, SimplifyLLC and the Tax Foundation consistently place our state in the bottom third nationwide for economic performance. Alarmingly, the Kauffman Foundation in 2021 revealed Pennsylvania has the lowest rate of new entrepreneurs among all states.

This dire situation is driving a significant exodus of both businesses and individuals from our communities, as highlighted in reports from Axios and the Bureau of Labor Statistics documenting high rates of outbound migration. Amidst these challenges, business optimism in Pennsylvania has plummeted to its lowest levels since 2012, underscoring the urgency for corrective action.

In response to this pressing need for reform, we hosted the House Republican Policy Committee in our legislative districts — specifically Columbia, Northampton and Lancaster counties — to solicit direct feedback from our business community. Testimony across various industries uniformly depicted Pennsylvania’s tax structure as burdensome and punitive, necessitating immediate reforms to retain businesses and residents, and enhance our competitiveness. Key areas for reform that could drastically improve our economy and present opportunities for family-sustaining jobs — including corporate net income tax, net operating losses and the accelerated sales tax — emerged as consistent themes demanding our urgent attention.

During the latest legislative session, Pennsylvania’s General Assembly advanced substantial tax reform aimed at tackling the state’s excessive corporate net income tax rate, then the nation’s second highest at 9.99%. It gradually reduces the corporate net income tax by 0.5 percentage points annually until it hits 4.99% in 2031. We cannot afford to wait until 2031.

Research highlights numerous benefits of reducing this tax rate, including increased investment, gross domestic product growth, higher wages, enhanced property values and expanded job opportunities. Comparisons between states with high and low corporate income tax rates from 2000 to 2020 show a 10% higher growth in state revenues in low-tax states, along with positive correlations with population growth and worker wages.

The transformation of North Carolina through corporate net income tax reform serves as a notable example, with its efforts propelling it from 44th to ninth place in the Tax Foundation’s Business Tax Climate ranking.

Accelerating Pennsylvania’s reduction would significantly enhance our state’s competitiveness, stimulating investment, job creation and economic growth. House Bill 1447, introduced by Rep. Dallas Kephart, R-Clearfield/Cambria, would achieve this.

Pennsylvania’s treatment of net operating losses stands out as an extreme outlier among states’ tax provisions and is another consistent area of concern for our business community.

Net operating loss deductions, a tax provision allowing businesses to carry losses forward and deduct them from future profits, particularly affects two vital business types in our economy: start-up firms and those in cyclical industries like manufacturing.

Currently, Pennsylvania and only one other state cap these deductions below the federal limit of 80% of taxable income. Conversely, 20 states align with federal rules, while 24 states have no deduction cap at all.

Moreover, although corporations can apply a portion of net operating losses against corporate net income, small businesses subject to personal income tax lack this capability, resulting in the “Pennsylvania startup penalty.” Since smaller businesses and entrepreneurs typically lack the capital of larger corporations, the ability to use net operating losses would afford them greater financial control, facilitating business initiation or expansion.

This penalty acts as a barrier to business growth and entrepreneurship, underscoring the pressing need for legislative intervention to sanction this vital tax strategy and eradicate the Pennsylvania startup penalty. House Bill 701, introduced by Rep. Thomas Kutz, R-Cumberland, would achieve this.

Another reform that would greatly impact our business community would be repealing the accelerated sales tax requirement. This requirement mandates that businesses collecting over $25,000 in sales tax in the third quarter of the previous year make monthly prepayments equivalent to 50% of their projected sales tax collections.

To streamline compliance and alleviate paperwork burdens on small businesses, repealing this requirement is essential. Doing so would enable small businesses to remit collected sales tax revenues in line with their filing period without additional complexities. House Bill 1404, introduced by Rep. Jesse Topper, R-Bedford/Fulton, would achieve this.

Our state’s economic challenges are profound, as evidenced by dismal rankings in job prospects and economic indicators. Urgent action is needed to reverse the tide of outbound migration and revitalize our economy. We cannot afford to wait while our businesses struggle to stay afloat amid an unforgiving tax landscape or flee the commonwealth for more prosperous opportunities in other states.

It’s imperative that we prioritize the needs of our business community and enact meaningful tax reform that fosters opportunities for family-sustaining jobs, an environment conducive to entrepreneurship and prosperity for all Pennsylvanians.

Note: This column originally appeared in the Allentown Morning Call.