New Measure Would Cut Taxes, Close Loophole for Businesses

May 7, 2012

House lawmakers have passed a business-friendly tax measure that would bring the corporate net income (CNI) tax rate down by 3% over the next several years. Whether it's possible to implement such a bill and still balance the budget, however, remains unclear.

"I, at this point today, don't know that we're in any position to reduce the CNI in order to balance this budget," said Governor Tom Corbett. While Corbett said he is still mindful of his campaign promise to consider lowering the CNI rate, he maintained his priority now is on passing a balanced budget.

The bill's backers contend revenue lost in the cut would be offset by funds gained in closing the so-called Delaware loophole, which allows certain companies to shift expenses to low-tax states. Businesses taking advantage of the loophole are expected to oppose the bill.

"What we'll see in the first couple years, we'll see lower tax rates for all businesses and we'll see additional revenue coming in from the folks who were avoiding paying taxes in Pennsylvania for all those years. So it will be revenue neutral," said Indiana County Republican Representative Dave Reed, the bill's sponsor.

Reed said based on past tax cut models, the Delaware loophole legislation would likely bring more revenue into the commonwealth over the long run.

Governor Corbett has not signaled that he would support the plan.