Adding to the budget drama: How to cut the PA corporate tax rate

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By Jaxon White | Pennsylvania Capital-Star

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Cutting Pennsylvania’s corporate tax rate, which is among the highest in the country, has become one of the few items of bipartisan agreement this budget season.

But as discussions on the Commonwealth’s 2022-23 spending plan enter what are hoped to be their final days this week, Republicans and Democrats in the Legislative Assembly are still trying to reach an agreement on how to proceed.

Lawmakers from both parties in the Republican-controlled General Assembly have backed bills to cut the state’s 9.99% net corporate income tax, but neither has garnered enough support. support to go through both chambers.

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Despite the current stalemate, Erica Clayton Wright, spokesperson for Senate Republicans, said in a statement that she was “optimistic” that the final state budget – which was due to be in place by midnight June 30 — could make a decision on the tax.

History has shown that may not be the case.

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The CNIT rate has not changed since 1995, and recent discussions to reduce the tax among state officials have continued for months.

Democratic Gov. Tom Wolf, a former businessman, has proposed a plan to lower the tax to 6.99%, with a plan to lower it to 4.99% in the future. However, bills in the name of his plan have languished in the respective chambers’ finance committees since April.

In April, the State House passed a bill in a 195-8 vote that would immediately reduce the tax rate to 8.99% and could lead to a future cut to 7.99% if the state’s general fund has a specified excess balance. He has remained on the Senate Finance Committee since late April.

The state Senate passed two different bills to reduce the tax, but both were referred to the House Finance Committee in mid-June.

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A spokesperson for the House Republican Caucus said negotiations on the state budget were ongoing and a number of measures were being considered.

A spokesperson for Wolf’s office did not respond in time for publication.

There are even more bills that are caught in a similar state of purgatory with their own variations on how to lower the rate.

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About 50 chambers of commerce across the state have asked lawmakers to lower the state tax rate in a letter from the end of May. They argued, as do many proponents of a reduction in the CNIT, that the high tax rate deters companies from considering Pennsylvania as a place to set up new operations.

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“Our members and partners have relayed many stories of missed opportunities and countless lost jobs as businesses seek to locate in their cities, but ultimately choose to locate elsewhere due to Pennsylvania’s excessively high CNIT. “, we read in part in the letter.

Attempts to join the Pennsylvania Chamber of Commerce and Industry failed.

Any corporation, foreign or domestic, must pay the state’s net corporate income tax, but non-profit organizations, homeowners’ associations, business trusts, agricultural cooperatives, and membership organizations are excluded. from the list.

Corporate tax revenue totaled nearly $4.5 billion in fiscal year 2020-21, according to the Statistical supplement for the Fiscal Compendium for 2020-21. Tax funds, which are paid out of the profits of a Commonwealth registered company, are deposited in the general state fund.

The federal government also institutes a net corporate income tax of 21%, which is paid in addition to state tax. The federal rate was cut by 35% after former President Donald Trump signed the Tax Cuts and Jobs Act of 2017.

Jaxon White is a summer intern for the Pennsylvania Legislative Correspondents Association.

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