Three New Tax Breaks Would Come at the Expense of Pa. Schools and Services

After making deep cuts to schools, early childhood education, and health and human services, Pennsylvania lawmakers are now considering new tax breaks that will largely benefit a small number of higher-income earners.

In the coming weeks, the House and Senate are poised to take up the following bills:

  • House Bill 36 rewards investors in Pennsylvania start-up companies with a new tax credit that they can take even if they owe no state taxes. To qualify for the credit, the investor must have a net worth of $1 million or income above $200,000 a year. 
    • Pending before the House Commerce Committee. Estimated cost: $15 million annually.
       
  • House Bill 1100 exempts sales tax on the purchase of private and corporate aircraft, jet parts, and aircraft maintenance and repair. A car or truck purchase will be subject to sales tax, but those in the market for a private jet will get a tax break. 
    • Approved by the House Finance Committee by a vote of 18-6 on March 19. Estimated cost: $14 million annually.
       
  • Senate Bill 303 creates a new loophole in the state inheritance tax. It allows business owners to bequeath business assets tax-free to their heirs – an advantage unavailable to most hardworking Pennsylvanians who inherit a family home or car. 
    • Approved unanimously by the Senate Finance Committee on March 13. Estimated cost: Millions annually.

In addition to these three bills, Governor Corbett has proposed a new round of tax cuts beginning in 2015 that will ultimately cost hundreds of millions from the state treasury and put profitable corporations first in line when future budgets are negotiated. It would be the latest in a series of costly special tax breaks that have undermined Pennsylvania’s ability to invest in schools and other vital services. The cost of special tax breaks has more than tripled over the past decade, going from $850 million to just under $3.2 billion per year.

Pennsylvania can continue to fund special tax breaks like these or we can invest again in our children and our economic future – but increasingly we can’t do both. Unaccountable tax cuts undermine success in the classroom and growth in our communities, and they shift costs onto school districts, local governments, and property taxpayers.

Pennsylvania needs real tax reform that closes loopholes, ends special tax breaks, and levels the playing field for everyone. Only then can we enact a state budget that returns to tried-and-true investments in education and the services that promote long-term economic growth.