Finally, Pennsylvania has cut the Corporate Net Income Tax (CNIT).
With the new state budget, the legislature passed a plan that will reduce the state’s corporate income tax from the current 9.99% rate down to 4.99% over the next nine years. Starting next year, the rate will go down to 8.99%.
There were a number of good tax reform proposals to choose from, legislators ultimately went with HB 1342, sponsored by Rep. Jack Rader. This was the strongest plan on the table, making significant reductions to the rate over time, while providing immediate relief.
Pennsylvania businesses, workers, and consumers could not wait any longer for reform. The state currently has the second-highest corporate tax rate among the states – and New Jersey has eked ahead only on the back of a “temporary” corporate surcharge.
Republican legislators deserve immense credit for their leadership on this issue. While Governor Wolf nominally supported corporate tax relief, his plan was loaded with bad features that would have simultaneously driven up tax bills for companies and removed their options for recourse with the Department of Taxation. Achieving such major tax reform with Governor Wolf in office is an accomplishment.
This plan will make the state a much more attractive place to run a business. Tax Foundation writes that the state will move way up the business tax climate rankings: “Prior to passage of HB 1342, Pennsylvania’s overall structural ranking was 29th out of 50. The individual income tax structure ranked 19th, and the corporate income tax structure ranked 44th. In 2023, the Commonwealth will rank 23rd overall.”
Thanks to the legislature’s work this session, Pennsylvania has finally taken a huge step toward attracting people and businesses to the state instead of losing them.