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Improving the competitiveness of the commonwealth’s business climate is one of Gov. Tom Wolf’s highest priorities. That’s why the governor’s bold first budget proposal is designed to improve the way Pennsylvania taxes corporations and levels the playing field for all businesses.
By making Pennsylvania a place where businesses want to locate or expand, we can create new, 21st-century jobs and finally work toward strengthening the middle class.
Gov. Wolf will finally put an end to the capital stock and franchise tax after 17 years of on-again, off-again phasing down of this tax. No longer will businesses in Pennsylvania be forced to pay this tax on assets, even when they don’t make a profit.
Pennsylvania has the second-highest corporate net income tax rate in the nation. That’s unacceptable. The sticker-shock of this 9.99 percent tax loses both current and prospective business development. To make Pennsylvania competitive and create good middle-class jobs, Gov. Wolf’s budget proposes cutting the corporate net income tax rate by 40 percent – from 9.99 percent to 5.99 percent on Jan. 1, 2016 – then continuing to phase it down to 4.99 percent in 2018.
This tax cut, along with the elimination of the capital stock and franchise tax, will show current and future business owners and entrepreneurs that Pennsylvania is open for business.
Cutting the corporate tax rate to ensure all corporations are paying their fair share has been debated for years and has support on both sides of the political aisle. Combined reporting is used in more than 60 percent of states with a traditional tax on corporate net income, and will make it harder for multi-state corporate conglomerates to shelter income from Pennsylvania tax. The proposal also includes capping net operating loss deductions at the greater of $3 million or 12.5 percent of taxable income to ensure that the benefits of combined reporting are spread across all corporate taxpayers.
To further encourage business growth and job creation, Gov. Wolf proposed the Made In Pennsylvania Job Credit Program, which invests $5 million in tax credits to manufacturing companies that create good-paying, middle-class jobs.
Pennsylvania needs a comprehensive corporate tax plan that creates a competitive advantage for the state, and Gov. Wolf’s corporate tax reform proposal is a win-win-win: multi-state companies are held accountable for paying their fair share; all companies enjoy a lower tax rate; and new companies will grow operations and jobs in Pennsylvania.
Gov. Wolf’s budget will rebuild the middle class, and that starts by a real plan to create jobs and drive economic growth right here in Pennsylvania.