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Tax cut, no 'loopholes' in PA business proposal

State Rep. Tony Payton and a bipartisan group of colleagues are pushing a bill to lower the state's corporate tax rate while closing "loopholes" that let companies shelter profits from income taxes

State Rep. Tony Payton, D-Phila., aided by a group of fellow Democrats and at least one upstate Republican, has introduced legislation (H.B. 2560) to "reform Pennsylvania's business tax laws" along the lines recommended by the state Tax Reform Commission headed by ex-state revenue secretary Greg Fajt five years ago.

In a statement, Payton said the reforms "would increase competition between businesses and correct the state's unfair tax structure" while "closing loopholes" and boosting revenues to "help balance this year's state budget."

Proposals in the bill would cut the Corporate Net Income Tax rate to 7.9% from the current maximum 9.9%; simplify the current way of calculating the tax; allow higher loss credits "to encourage growth in biotechnology and start-up companies and cyclical manufacturing companies"; set up an independent tax appeal board; and force complex companies into "mandatory combined reporting" in order to "eliminate aggressive tax planning opportunities" such as the dodge where multistate companies avoid state income taxes by converting store profits into fees paid to to affiliates set up as Delaware tax shelters.

Philadelphia lawyer Stewart Weintraub told me the Rendell administration has so far been unable to pass these reforms. Payton, whose district akes in Olney, Frankford, Hunting Park and Oxford Circle, among other neighborhoods, acknowledged he and his colleagues don't yet have committments from legislative leaders to move the bill. But, he adds, "the first step is putting the bill out there, letting folks react. I hope to start discussions with the leadership as we debate what our budget should look like." (Also noted briefly in my column in today's print Inquirer here.)