Pennsylvania State Capitol Dauphin County Outside.JPG by Jared Kofsky is liscensed under CC BY-SA 3.0

Pennsylvania’s corporate income tax currently sits at 9.99% making it the second highest in the nation only behind New Jersey which sits at 11.5%thanks to a so-called temporary surcharge. The Keystone state’s corporate income tax has stayed at 9.99% since 1995 when it was lowered from 11.5%. 

Lowering the corporate rate has received bipartisan support. Republicans and Democrats have both proposed their own plans to lower the rate. House Bill 1960 sponsored by Joshua Kail (R-Beaver County) would lower the rate to 8.99% and opens the door to future corporate tax cuts. The bill passed the state House 195-8. 

Governor Wolf’s proposal has an ultimate goal of getting the corporate rate down to 4.99%. While on its face Wolf’s plan appears to be pro-growth, it is filled with toxic proposals. Governor Wolf seeks to disallow paying management fees to an affiliated entity such as paying a corporate HQ for legal services, which is a legitimate business expense. 

Governor Wolf also wants to give the state’s Department of Revenue more power. Businesses operating in the Keystone state would be required to justify their expenses to the agency effectively making them guilty until proven innocent. The agency would also have the final say on how much a company owes in taxes. To make matters worse companies would have no legal recourse. It would be the Department of Revenue’s way or the highway. Governor Wolf’s plan is nothing more than a trojan horse for more government power, and the nominal change in tax rate could easily be offset by higher burdens due to the Wolf plan’s poisonous provisions.

The Governor’s proposals have been included in Senate Bill 1077 sponsored by Senator Santarseiro (D) and House Bill 2510 sponsored by Representative Daley (D). SB 1077 would require out-of-state businesses operating in Pennsylvania to be subject to the same rules as Pennsylvania-based businesses.

Meanwhile, the Republican plan which passed with bipartisan support, House Bill 1960 would lower the corporate tax rate without allocating more power to bureaucrats. Furthermore, the bill would open up pathways for more cuts in the future. Other good proposals: House Bill 1163, and House Bill 2095. The options are there to reduce Pennsylvania’s incredibly high corporate tax rate without empowering the state bureaucracy to immediately undermine the rate cut. 

The absolute last thing that Pennsylvania wants to deal with is more people, businesses and jobs leaving the state because of the high cost of doing businesses in the Keystone State. If Governor Wolf is serious when he says the high rate is a problem, he will sign a no nonsense corporate tax rate cut when the Republican legislature sends it to him.