Pa. House passes proposal to lower business taxes

Pa. House approves proposal to lower business income tax, make changes to 'Delaware loophole'

Associated Press

HARRISBURG, Pa. (AP) -- A proposal to eventually cut business taxes by hundreds of millions of dollars a year easily passed the Pennsylvania House on Monday amid heated debate over how much it would help the state's economy, if at all.

The Republican-sponsored proposal would cut the corporate net income tax rate from 10 percent to 7 percent over 10 years beginning in 2015. If passed by itself and enacted this year, it would cost state coffers an estimated $600 million to $800 million a year.

Supporters said the bill's set of changes would make Pennsylvania's business climate more favorable and produce more jobs.

"We finally have the opportunity to put Pennsylvania back into the competition," said Rep. Stephen Bloom of Cumberland County, who joined all fellow Republicans and 21 Democrats to pass the measure.

Democratic opponents, however, described it as a massive giveaway to big corporations, and linked it to Republican policies they blame for the state's anemic employment situation.

"If tax cuts, tax credits and tax incentives lead to job creation, where are the jobs?" said Rep. Phyllis Mundy of Luzerne County, the ranking Democrat on the Finance Committee. "Why do we still have one of the highest unemployment rates in the nation?"

In floor debate, Democrats said middle class taxpayers would be stuck paying for the business tax cuts, but Republicans predicted that overall revenues would increase because of increased business activity.

"Reducing taxes actually brings in more revenue, something I think we're all anxious for," said Rep. Seth Grove, R-York.

The proposal also stiffens rules for the so-called Delaware loophole, a practice where companies shield revenues from state taxes by setting up a holding company for their intangible assets in a lower tax state. The bill takes an approach currently used in 23 other states, and is projected to raise more than $70 million a year.

It also would allow businesses to offset $5 million in losses, or 30 percent of income, against future profits — the current limit is $3 million.

The bill was sent to the Senate with a 129-65 vote. A similar measure passed the House almost exactly a year ago, then died when the session ended in November, although some of that bill's other provisions were adopted into law through a different legislation.

The bill's prospects in the Senate are unclear, but the prime sponsor, Rep. Dave Reed, R-Indiana, said passage in the House was "one step of the process."

Also Monday, Republican leaders met privately with GOP Gov. Tom Corbett with the state budget season in its final two-month push, although details were hard to come by. Corbett said the meeting touched on pensions, transportation and privatizing the state liquor system.

Corbett plans to join Republican lawmakers Tuesday for a pension-related news conference.

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