PA Manufacturers' Association- Press Releases

Archives- May, 2008:

05/27/08

CompetePA: Pro-growth business tax reforms affordable, necessary

HARRISBURG, PA -- With recognition that the Commonwealth's tax structure is uncompetitive and in light of the state ending the fiscal year with another revenue surplus, members of the CompetePA Coalition said today that business tax reductions are not only imperative to foster business and job growth, they are affordable as well.

"For years, the business community has been saying that more needs to be done to improve the competitive standing of Pennsylvania's job creators," said Gene Barr, vice president of government and public affairs for the Pennsylvania Chamber of Business and Industry. "With the current uncertainty about the economy, now is the time to ensure that employers remain competitive to ensure their ongoing viability."

On Tuesday, Senate Republicans announced their ideas for economic stimulus, which include two of the unified business community's top tax priorities. The CompetePA Coalition is calling for the elimination of the cap on Net Operating Losses and the implementation of a Single Sales Factor for the Corporate Net Income tax apportionment formula.

Interestingly, one day after the Senate news conference, Colorado became the latest state to move to a Single Sales Factor with the enactment of significant changes to that state's corporate income tax apportionment provisions. Virginia, already considered a business-friendly state, is positioning the adoption of a Single Sales Factor when its legislature returns to session.

Under the Senate's plan, the current CNI formula of 70 percent sales, 15 percent payroll and 15 percent property would be changed to 85 percent sales. Additionally, net operating losses would be capped at $5 million or 20 percent of taxable income, as opposed to $3 million or 12.5 percent of taxable income as it now stands.

"Pennsylvania has one of the most restrictive corporate income tax structures in the United States, arguably the world if you look at our uncompetitive rate," Barr said. "While the ultimate goal of the business community is to base the CNI solely on sales and eliminate the NOL cap, the Senate's plan is certainly a step in the right direction that will give a leg up to Pennsylvania based companies and provide a boost to start-up and cyclical companies that are hurt by the restrictive NOL cap."

Barr said because Pennsylvania's Gross Domestic Product is growing at only half the rate of the national average, combined with a poor ranking for its corporate tax structure, lawmakers can't afford not to make positive changes.

"And with an anticipated revenue surplus of $300 million, reducing the tax burden on job creators is achievable this year," he stressed.

Barr said the business community is encouraged that many in the General Assembly from both sides of the aisle understand what business needs to compete and prosper.

"The support we have seen from legislators and the governor is a very positive sign," said David N. Taylor, executive director of the Pennsylvania Manufacturers' Association. "These pro-growth measures are reasonable, affordable, and have earned support on both sides of the aisle in both legislative chambers. They are necessary to improve Pennsylvania's competitiveness and strengthen our economic performance.

"Job creators are hopeful these positive changes to our business tax structure will be included in this year's budget."

For more information on the CompetePA Coalition, visit www.CompetePA.com.

Contact: Lesley Smith, 717 720-5446

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