What's in the PA House Democrats Tax Bill?

OCTOBER 2, 2009 | by NATHAN BENEFIELD

Yesterday, the Pennsylvania House Rules Committee approved a "gut-and-replace" amendment to HB 1531 - which had previously been a bill to extend tax relief for military families - which includes a number of tax increases. (Note that the practice of gutting and replacing bills in Rules Committee had been used for things like the 2005 pay raise, but was banned with the "reforms" in 2007, before House Democrats decided to go back to the old way earlier this year).

The new bill, pushed by House Democrats, is different than what was agreed to in the PA budget "deal", and Senate Republicans have said this puts the negotiation "back to square one."So what is in the now 129-page bill?

  • Exempts purchases of helicopters and helicopter parts from the sales tax.  This may seem a bit bizarre, like something thrown in to get the vote of one lawmaker with a helicopter manufacturer in his district, but I believe it was inspired by my pointing out that buying everyone their own Airwolf was cheaper than Corridor One.
  • Moves up the payment date for the Sales Tax in 2009-10 and for the Personal Income Tax for quarterly filers in 2010-11.
  • Increases the sales factor for corporate taxes to 83% this year and 90% next year.
  • Increases the amount of net operating loss corporations can carry forward.
  • Increase, retroactive to January, 2009, the Capital Stock and Franchise Tax to 2.89 mills.  This rate would remain until 2012, when the phaseout would resume.  The new elimination date would be January 1, 2014.
  • Tax on Medicaid payments to Managed Care Organizations.
  • 25 cents/pack increase in the state cigarette tax. 
  • Tax on cigars, smokeless tobacco, and other tobacco products - 30% rate (when sold to retailer)
  • License fees for tobacco manufacturers, wholesale dealers, and retailers.
  • Natural gas severance tax - 5% of gross value plus 4.7 cents per thousand cubic feet (and lots of provisions how that revenue will be divied up).
  • Educational Improvment Tax Credit (EITC) - increase in income eligibility for families.
  • Reduces all tax credits by 33% - including the EITC and presumably the Film Tax Credit.
  • Tax Amnesty for 2009-10 (delinquent as of June 30, 2009; amnesty period of April 26-June 18 2010.
  • Table Games (if approved in separate legislation):
    •  License fees : $20 million from category 1 (racino) or 2 casinos, $7.5 million from category 3 (resort hotel).
    • Tax: 34% of daily gross table revenue.



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