Newspaper, Former Revenue Secretary Speak Out Against Special Interest Tax Break
September 16, 2009
State legislative leaders have agreed to business tax breaks in the three-caucus compromise budget that would cost the state $74 million in revenue in 2009-10.
These special interest tax breaks are the "price" for a temporary delay in the Capital Stock and Franchise Tax phase-out - one of the proposals to solve the state's budget crisis.
The Scranton Times-Tribune editorialized against the "Sales Factor" tax break in today's paper, and former state Revenue Secretary Tom Wolf penned an op-ed in today's Patriot-News of Harrisburg arguing it sets back tax reform efforts.
The three-caucus compromise budget would freeze the Capital Stock and Franchise Tax rate at the 2008 level for the next three years, which will generate $374 million in needed revenue to balance the 2009-10 state budget and additional revenue in the next two fiscal years. The multi-year Capital Stock and Franchise Tax phase-out was previously delayed after the 2001 recession to help reduce a revenue shortfall during former Governor Mark Schweiker's tenure.
Some budget negotiators advocated for a permanent companion tax break for a select few companies by placing more weight on the "Sales Factor" in calculating the Corporate Net Income Tax.
Companies doing most of their business in Pennsylvania will not benefit at all from this change in the corporate tax calculation. According to the Department of Revenue, about twice as many companies doing business in Pennsylvania will actually pay more under a change to the Sales Factor than will see a tax break. Nearly half the gains will go to only 4 percent of all affected companies.
This sought-after tax break also amounts to a permanent tax cut in exchange for a temporary revenue source from delaying the Capital Stock and Franchise Tax phase-out. Over the long run, it will make Pennsylvania's tax system even more unfair and out of balance.
CLICK HERE to read briefing papers and other materials about the Sales Factor changes, including a letter from Mr. Wolf to lawmakers urging them not to adopt it.
