Will save businesses $200 million this year, says Revenue Dept.
By Jim Panyard | PA Independent
The Pennsylvania Department of Revenue has adopted an interpretation of federal tax laws that could save corporations in the state up to $200 million in taxes during a 15 month period, while costing state tax collectors the same amount.
The federal Joint Tax Committee recently adopted measures allowing a 100 percent depreciation of capital investment and other business costs between the last quarter of 2010 through the entire calendar year of 2011.
The DOR adopted the plan in an attempt to spur business investment and economic growth in the state, according to spokeswoman Elizabeth Brassell. Beginning Jan. 1, 2012, the accelerated depreciation will no longer be in effect at the state level.
Before the new interpretation of federal tax law, corporations in Pennsylvania were required to depreciate qualified business expenses over a number of years. Under the state decision, the businesses now can depreciate 100 percent of the costs up front and in a single sum.
Corporations pay a 9.9 percent corporate net income tax in Pennsylvania, the highest in the nation.
The new ruling will not impact small businesses and limited partnerships, currently taxed at the state personal income tax rate of 3.07 percent.
A coalition of labor and political activists including PennAction, Keystone Progress and Local 1776 of the United Food and Commercial Workers, criticized the move. The groups said the administration of Gov. Tom Corbett was giving away tax revenues during one of the tightest budget years in state history.
The groups suggested the tax revenues would be better spent to fund adultBasic, a state taxpayer subsidized health plan, which Corbett allowed to expire at the end of February.
“It is unconscionable that Corbett is kicking the working poor off of adultBasic, while giving hundreds of millions of dollars to mostly out of state corporations,” said Michael Morrill of Keystone Progress. “Corbett has his priorities upside down.”
The coalition also claimed the tax break could amount to as much as $833 million in state tax breaks, based on a study done by the Washington, D.C.-based Center on Budget and Policy Priorities.
CBPP’s Nicholas Johnson said there are several possible reasons for the numerical discrepancy, including the fact his group spread its estimates over parts of three fiscal years, while the DOR ruling covers only 15 months.
“We also based our estimate on actual returns, which no one else has access to,” said Brassell, the DOR spokeswoman. “They (CBPP) also may not be aware that those paying the personal income tax rate are completely decoupled from the interpretation.”
