Tax Reform
4:05 pm
Fri April 12, 2013

Corbett Tax Plan Full of Promises, But Opponents Have Doubts

Gov. Tom Corbett's tax reform plan is getting a closer look from state lawmakers.

The proposals would lower the state’s corporate net income tax and complete the elimination of another tax on businesses.  

Department of Revenue Secretary Dan Meuser said 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," he said.

Meuser said the proposed package to lower taxes on businesses will, according to projections, create more than 18,000 jobs in the next decade.

Meuser wants to bring Pennsylvania’s corporate net income tax rate down by three percentage points so it no longer has the second-highest rate in the country.

"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," he said. "Over the next twelve years, very gradual, very incremental, nothing too drastic."

Opponents of the administration’s plans say that incremental approach does something like what past legislation to reschedule pension payments have done: make the bulk of the costs of the change a future administration’s problem.

The left-leaning Pennsylvania Budget and Policy Center said that while the commonwealth’s corporate net income tax rate may be high compared to other states, when looking at what taxes corporations actually pay from state to state, Pennsylvania is in the middle of the pack.

The group supports the Corbett administration’s proposals to improve enforcement of the tax code though, and suggested the Department of Revenue be given more resources for such efforts.

State Representative Phyllis Mundy of Luzerne County, ranking Democrat on the House Finance Committee, said the Corbett plan fails to close corporate tax loopholes.

A House Republican has reintroduced a plan this session to close a loophole that allows some corporations to minimize their Pennsylvania taxes by shifting ownership of companies to Delaware. The bill passed the state House by a wide margin last year.

Mundy said the administration’s plan -- when fully phased in by 2025 -- would result in an $800 million annual loss for state tax revenues:

"And I’m not at all sure, I wish I could believe, that these tax cuts for large corporations would result in enough job creation to overcome that deficit," she said.