For more than a quarter century, the Lancaster Chamber has advocated for a reduction in the state’s corporate income tax, which at 9.99 percent is the second highest in the nation, behind New Jersey.
Corporate tax cuts were again the topic of an event held Tuesday at the Lancaster Chamber. But this time, instead of pushing for the measure to move forward, the press conference was called to celebrate the recent passage of a state budget that will cut the corporate tax rate in half by 2031.
“This is a historic event that dramatically changes Pennsylvania’s business climate,” said Brian Vernon, executive director of the Governor’s Action Team, speaking at the Pennsylvania Chamber of Business and Industry event, which included remarks from local state representatives and leaders of business groups.
“This lower rate is a game changer for Pennsylvania,” Vernon said.
A $45.2 billion package of tax reforms in the state budget includes a measure that would cut the corporate net income tax from 9.99 percent to 8.99 percent on Jan. 1, then gradually reduce it each year in stages until 2031 when it reaches 4.99%.
In the 2021-22 fiscal year, the corporate net income tax brought in $5.3 billion, according to the Independent Fiscal Office.
Supporters say the tax revenue the state loses because of the rate cut will be more than offset by new revenue from out-of-state businesses moving here or from expanding businesses already here. Having such a high corporate tax rate unnaturally suppresses economic growth, supporters say.
“We advise our clients, we don’t make decisions based on taxes; make decisions based on what’s best for your business. Unfortunately, that wasn’t possible when it came to Pennsylvania because the rate was so high that you had to take that into account when making business decisions,” said Mark Heath, a certified public account who is a partner and director of tax services at the office. of McKonly & Asbury in Lancaster.
Gov. Tom Wolf campaigned on cutting the corporate net income tax when he first ran for governor and was a strong supporter of the measure, which was part of a budget plan approved by a vote of 180-20 in the House and 47-3 in the Senate.
“We’re here as proof that with bipartisan cooperation and a strong public-private partnership, we can accomplish great things for the community,” said Luke Bernstein, PA Chamber President and CEO.
Pennsylvania House Speaker Brian Cutler, R-Quarryville, said tax reform was possible this year because the budget also deposited $2.1 billion into the rainy day fund, an emergency savings account, making the fund the largest -the $5 billion high.
“That’s what allowed us to make these other choices in terms of tax policy and improving the business environment here in the Commonwealth,” Cutler said at the House press conference Tuesday.
Ryan Aument, a Republican state senator who lives in the town of West Hempfield, said he hopes the full tax cuts will happen before 2031.
“I would certainly be an advocate for accelerating that schedule, but we certainly need to stay the course,” he said.
No matter who it is, the state’s next governor will also support faster corporate income tax cuts. Josh Shapiro, the state’s attorney general, who is the Democratic candidate for governor, and Doug Mastriano, the Republican candidate, have said on the campaign trail that they want the tax rate to fall faster. Neither was at Tuesday’s news conference.
Lisa Riggs, president of the Lancaster County Economic Development Corporation, said at the PA House press conference that the corporate tax and annual reduction schedule written into the law will give businesses the certainty they crave when making investment decisions.
Heath said the tax cuts will force his firm to change the historical advice it has given clients about state taxes.
“In the accounting and tax world, every year we’ve exceeded the governor’s budget … and every time there’s been a reduction in the (corporate net income tax),” he said. “And we’ve always told our customers, ‘Don’t worry, that will never happen.’