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June 20, 2013 | By | Posted in WatchBlog

WATCHBLOG: Corbett’s proposed biz tax elimination may be in jeopardy

By Melissa Daniels | PA Independent

TAX QUESTIONS: Will the capital stock and franchise tax get eliminated once and for all this budget season?

TAX QUESTIONS: Will the capital stock and franchise tax get eliminated once and for all this budget season?

HARRISBURG – Eliminating one of Pennsylvania’s business taxes once and for all might not happen this budget season as lawmakers look to find new revenue sources.

Gov. Tom Corbett proposed a full elimination of the capital stock and franchise tax in his February budget address. But as the budget deal shifts to the hands of the state Senate, the case may change.

Secretary of Revenue Dan Meuser said keeping the tax around is a discussion throughout the capitol, but there’s “many moving parts” to budget negotiations at this time.

“The governor’s proposal included a phase –out so that showed where the governor is,” he said. “But anything further than that is being discussed, again, through both houses, the governor’s office and leadership.”

The capital stock and franchise tax is paid on business assets according to their value on a balance sheet, regardless of the company’s income.

Pennsylvania, according to the administration, is the only state in the country to tax both income and assets.

The House budget proposal passed earlier this month included elimination of the tax. But earlier this week Senate Appropriations Chairman Jake Corman, R-Centre, said he would consider delaying the tax elimination.

Because it’s a low rate – about 1.89 mills – Corman said he didn’t think it would have much of an effect on whether businesses decide to stay or leave the state.

“Is that phase-out more important than education dollars? Higher education dollars? Envionrment dollars? Economic development dollars?” Corman said. “That’s what you’re weighing.”

Senate Democrats are supportive of keeping the tax.  Their estimates say the state could bring in an extra $360 million if they don’t eliminate the tax until January 2015.

Kevin Shivers, executive director of NFIB in Pennsylvania, said the capital stock and franchise tax is essentially a double tax on businesses, paid on their assets regardless of whether they make a profit.

In 2000, Gov. Tom Ridge and the legislature “made a promise to businesses recognizing that our tax climate was so bad that we were going to phase out this tax,” Shivers said. It was supposed to be gone for good in 2009.

But since then, lawmakers already voted to slow down the elimination twice. Businesses have paid more than $6.9 billion than they would have if the original law was not changed, according to the Pennsylvania Business Council.

Shivers said if the government can’t keep its word on eliminating the tax once and for all, it will be difficult for businesses to trust them again – especially at a time when the administration and many lawmakers say they want to reduce unemployment in Pennsylvania.

If the tax is postponed again, it’s probably not going away, Shivers said.

“If the government is to say, ‘We’re serious about the jobs, climate, we’re serious about creating an environment to foster business growth, we want to change the the tax code,’ we’ll believe them when we actually see some results,” Shivers said.

Contact Melissa Daniels at melissa@paindependent.com

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Melissa Daniels is a reporter for PA Independent. She can be reached at 717-350-0962 or Melissa@PAIndependent.com

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