Wolf: Cut Pa. corporate tax rate, close loopholes

BETHLEHEM, Pa. - Gov. Wolf on Wednesday proposed cutting the state corporate net income tax rate in half by 2018, a step he said would allow Pennsylvania to move from the nation's second-highest rate to one of its lowest.

Unveiling pieces of his economic plan to Lehigh Valley business leaders, Wolf called for gradually reducing the corporate net income tax from 9.99 percent to 4.99 percent, and eliminating the already-expiring capital stock and franchise tax.

Wolf also said he wanted to implement "combined reporting," a concept in which the state could tax a multistate corporation's total revenue, not just its Pennsylvania earnings. He said the maneuver would "level the playing field" for businesses in the state.

The policies, Wolf said, would likely result in an overall tax reduction for businesses in Pennsylvania. But he declined to release specifics, including the size of the potential revenue loss, or how the state would make it up.

The Democratic governor's proposals will need approval from the Republican-controlled legislature. GOP leaders indicated they saw promise in Wolf's ideas, but wanted details.

"We look forward to receiving and considering an entire package of specifics from the governor, not one idea floated at a time," said state Senate Majority Leader Jake Corman (R., Centre).

House Majority Leader Dave Reed (R., Indiana) said improving Pennsylvania's business tax climate has long been a priority of his caucus. While members "can't fully evaluate the program until we see the details," Reed said, "we are certainly encouraged by the governor's recognition that here is an opportunity to create a more competitive tax climate."

Wolf's announcement came six days before his scheduled budget address to the legislature. His overall plan is expected to call for a hike in personal taxes and the minimum wage as steps to offset a budget gap of more than $2 billion. Wolf declined to address questions on those topics from reporters Wednesday.

GOP leaders in the House and Senate have signaled little interest in tax increases, and instead have been pushing for privatization of the state liquor store system and changes to the public employees' pension plan.

The proposed corporate tax cut would be implemented gradually, Wolf told an audience of about 100 business leaders at a new facility on the former site of Bethlehem Steel Corp's works.

In 2016, Wolf said, the rate would drop to 5.99 percent, then in 2017 would fall to 5.49 percent. In 2018 the rate would settle at 4.99 percent, Wolf said.

That would rank today as the fourth-lowest rate in the nation among states that have corporate income taxes. Six states, including Texas and Ohio, have no corporate income taxes, according to the Tax Foundation, a public policy think tank.

Wolf called the current rate of nearly 10 percent "incredibly obscene" and said he believes his proposed cut could encourage businesses to grow in Pennsylvania.

Gene Barr, CEO of the Pennsylvania Chamber of Business and Industry, said business leaders were still waiting to hear all the details of Wolf's plans before coming to conclusions about their merits.

While a potential cut to the corporate net income tax rate would be a welcome development, Barr said, implementing combined reporting could force multistate companies that operate in Pennsylvania to pay more in state taxes - depending on how the law is written.

"Bottom line," Barr said, "until we see exactly what it is, we can't say, yeah it's good, no it's not."

Wolf declined reporters' requests for specifics about the financial impact of his plan. More details, he said, would be unveiled during next week's budget address.

Among the other economic development proposals he touted is a $5 million tax credit for manufacturing firms to create "good-paying middle-class jobs," as well as providing $5 million to the state's Industrial Resource Centers, a network of nonprofits designed to help state manufacturers.

He also proposed allocating $18 million from the state's 2015-16 budget to two job development programs: $10 million to the Industry Partnerships program, which seeks to enhance collaboration between companies operating in similar industries, and $8 million to the Workforce Economic Development Network of Pennsylvania, which offers employers opportunities to train new and existing workers.

Current: 9.99% 

2016: 5.99%

2017: 5.49%

2018: 4.99%

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