Pennsylvania’s Enormous Corporate Income Tax Is a Job Killer
With Economy in the Ditch, It’s Time to Ditch This Levy
Being from the South, I feel blessed for a lot of reasons, not the least of which is that there is no state personal income tax or state corporate income tax where I’m from
So imagine my shock to find out that on top of outrageous and unfair property taxes and a sales tax, Pennsylvania has one of the highest corporate income taxes in America.
Pennsylvania’s corporate net income tax has a flat rate of 9.99%. That’s almost what people owe in terms of tithing. For purposes of comparison, note that Pennsylvania generally taxes personal income at a flat rate of 3.07%.
Oh, and here’s a real kicker – this year corporations that don’t have employees, office space or property in Pennsylvania will still owe corporate income taxes to the state treasury.
Pennsylvania announced the change starting in the 2020 tax year through a tax bulletin published Sept. 30. It cites a groundbreaking U.S. Supreme Court decision last year as the legal basis to expand how it applies the tax. The new rule is expected to apply to services sold, since federal law prohibits state corporate income taxes on “tangible personal property,” such as office equipment, furniture or clothing.
The state Department of Revenue said it does not know how much money in new tax collections to expect, but I can tell you for certain what it will do for companies considering decamping from Pennsylvania, and even more certainly what it will do to companies considering moving to Pennsylvania.
No wonder businesses are fleeing. In fact, the only thing that has propped up Pennsylvania’s economy in terms of in-migration of businesses over the last decade has been the boom in the shale and oil industries. With oil hitting unprecedented lows, that cow isn’t going to give any more milk for a long, long time.
From what I’ve seen, corporate income taxes delivered $3.4 billion to Pennsylvania’s treasury in 2019, or less than 10% of the state’s overall collection of almost $34.9 billion for its main operating account.
Sales and personal income taxes contributed $25 billion.
It’s not hard to see that the budget could be cut, and then the corporate income tax could be reduced or eliminated, all in balance. This would help spur bringing businesses back to Pennsylvania.
Further, when the COVID-19 lockdown is over, the state and every business here will be struggling for years to recover.
A cut in the corporate income tax would be a major boost.
But we’re not going to see that from Democrat Gov. Tom Wolf, nor would he sign such a measure. That’s what the 2022 election is for.