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PA Dems: Cut corporate tax rates, loopholes

PA Senate Democrats want to cut business tax rates while increasing collections from Comcast and other big companies by making it tougher to move income earned in Pennsylvania to lower-tax states.

Pennsylvania Senate Democrats -- a 20-member minority among the 50 state senators -- this morning revived a proposal to force corporate affiliates to file combined tax reports, eliminating the "Delaware loophole" that allows big, complex companies to move income out-of-state and avoid Pennsylvania taxes.

The caucus says this would boost tax collections by $500 million next year, enabling the state to cut its top capital income tax rate to 7.99% (from the current 9.9%), while eliminating the old capital stock and franchise tax by 2013.

That would have the effect of shifting millions in taxes from small businesses to big, often out-of-state companies, said Sen. Jay Costa, D-Allegheney.

Democratic caucus leader Sen. Robert Mellow, D-Scranton, acknowledged he'll need Republican support for the bill -- he'll even accept Republican sponsorship of a revised bill.

"Give us the opportunity of discussing it on the floor of the Senate," Mellow concluded. "Let's find out exactly who the opponents are. Who they're lobbying for and why they're doing it? I'm going to be very hard pressed to understand why there are not six votes in the Republican caucus" to help the Democrats pass the bill.

UPDATE: After the announcement, Mellow told me "fewer than 10" corporations will face "substantial" tax increases if the bill passed. One is Comcast, the biggest company based in Philadelphia, Mellow said. He said he's trying to get state revenue officials to give him a list of the others, probably including "retailers and oil companies" based out of state.

The state chamber of commerce has in the past "defended" these corporate taxpayers in opposing these tax changes, but local chambers representing Pennsylvania regional businesses haven't gotten involved, because "smaller corporations cannot take advantage of the Delaware loophole." Other states - most recently New York and West Virginia - have passed similar reforms, he added.

Even with the reforms, "I don't think we can head off a tax increase."

Why try this now? "When we were running a surplus we said let it go. But now we're at crunch time."

ALSO: 23 states have adopted "combined reporting" to close corporate income tax loopholes, Michael Mazerov of the liberal Center on Budget and Policy Priorities wrote last month, here.