Gov. Corbett’s tax reform plan is getting a closer look from state lawmakers. The proposals, included in the governor’s budget proposal unveiled earlier this year, would lower the state’s corporate net income tax and complete the elimination of another tax on businesses, among other things.
Department of Revenue Secretary Dan Meuser told a House panel last week the net effect will be more than $1 billion in new tax revenue over the next 17 years.
“That comes from personal income growth, that comes from employment, and that comes from sales tax revenues that are derived from those who are now working that weren’t before,” said Meuser. He said projections show that implementing the entire plan would yield 18,000 jobs in the next decade.
“The one glaring omission for me in this proposal is the failure to close the corporate tax loopholes,” said Rep. Phyllis Mundy (D-Luzerne), who has pushed legislation to close a loophole that allows some corporations to minimize their Pennsylvania taxes by shifting ownership of companies to Delaware.
Rep. Dave Reed (R-Indiana), has reintroduced a measure to close the so-called Delaware loophole this session. It passed the state House with bipartisan support last year.
The administration is also receiving full-throated criticism for its plan to bring the corporate net income tax rate down by three percentage points.
“Our plan is to, in a very reasonable, gradual, incremental way, beginning in 2015, begin lowering the 9.99 rate by point-one percent in 2015 and then by point-two percent over the following ten years,” said Meuser. “Over the next twelve years – very gradual, very incremental, nothing too drastic.”
Opponents of the change at the left-leaning Pennsylvania Budget and Policy Center say such an incremental approach would have an effect similar to past efforts that rescheduled pension payments: that is, make the bulk of the costs of the change a future administration’s problem.
The group also takes issue with tinkering with the state’s corporate net income tax, which free market groups routinely point out is the second highest rate in the country. PBPC says while the rate may be high, when looking at what taxes corporations actually pay from state to state, Pennsylvania is in the middle of the pack.