General Assembly Passes Tax Cuts, Sends to Gov. Rendell for Signature

Two Senate news releases (Piccola and Thompson)on the Senate’s concurrence of a PIT and CNI tax rate reduction…

Piccola Calls on Governor to Sign Tax Cuts into Law

HARRISBURG – Seeking to protect and preserve jobs, Senate Majority Whip Jeffrey E. Piccola (R15) praised the Senate today for concurring with House amendments and finally passing House Bill 515, legislation designed to improve the business climate in Pennsylvania, and urged Governor Rendell to take action by signing the pro-growth measure that includes tax cuts for the state’s families and job creators.

The legislation includes a reduction in the Personal Income Tax (PIT) from the current level of 3.07 percent to 3.05 percent in 2007. In addition to the PIT cut, the legislation includes a reduction in the Corporate Net Income (CNI) Tax rate and a change in the Single Sales Factor.

“Through a series of much-needed and proactive tax reductions, this legislation promises to promote economic growth by encouraging job creation – an area our Commonwealth has been lagging in for too long. If the Governor is serious about jobs and job creation, then he should exercise true leadership by signing this legislation,” said Piccola.

“I have been pleased to lead the charge on many of the initiatives included in House Bill 515 that will put Pennsylvania back in the job creation and retention business. For instance, I introduced a measure to change the Single Sales Factor in Pennsylvania and I am gratified to see this legislation incorporates that concept. This bill will cut taxes and reduce the government burdens that are placed upon our job creators and the Commonwealth’s citizens at large,” he said. “Unfortunately, the Governor has announced that he will veto these tax cuts. This is an affront to all taxpayers in the state.”

“Should the Governor decide to veto this legislation, which he has threatened to do, Pennsylvania’s job creators will continue to be held hostage to the longstanding barriers of higher taxes, fees, and regulations. It should be no surprise to the leader of this state that our economic future is tied to having a competitive business edge, and this is accomplished only through lower taxes and regulatory reform, not by increased government programs and spending plans. Lower taxes create jobs and employ Pennsylvanians. Signing these tax cuts into law should be a no-brainer,” he said.

“When we heap more costs on the business sector, the more likely it is that these employers will either move or shut down – taking jobs with them. The reductions contained in this legislation will help the job creators of this state at a time when good-paying jobs are sorely needed. We should be working to save these jobs, not eliminate them. Our families are counting on it,” Piccola said.

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Senate sends tax cut package to Governor
HB 515 includes PIT reduction, economic incentives

The Senate today approved a measure to provide tax relief to families and small businesses while promoting economic development and job creation, according to Senator Robert J. Thompson, Chairman of the Senate Appropriations Committee.

House Bill 515 is now headed to the Governor for his signature and enactment into law, Senator Thompson said

HB 515 would reduce the state Personal Income Tax, which is levied on individual wage earners and small businesses in the Commonwealth, from the current level of 3.07 percent to 3.05 percent in 2007. Previously, Senate Republicans had amended HB 515 to provide a two-step reduction that would have reduced the PIT rate to 2.98 percent in 2008.

“While we had hoped that the Senate Republican package, which included more extensive tax reductions, would be the one sent to the Governor, we also recognize that it is essential to provide relief to taxpayers and small businesses,” Senator Thompson said. “This is a step forward in rolling back the tax rate. It will save millions of dollars for wage earners and small businesses.

Senator Thompson said many small and start-up businesses would also benefit from an expansion of the state’s net operating loss (NOL) carry forward provision, which allows companies to apply losses in one year to lower their tax bills in future years.

“These cuts are intended to help small businesses establish themselves in Pennsylvania — including high-tech firms that often have long start-up periods and heavy losses early on. Once established, these businesses typically expand rapidly and create good-paying jobs for skilled workers. It’s a positive economic development cycle for business and families alike,” Senator Thompson said.

HB 515 includes a series of increases in the state’s NOL cap to $10 million or 75 percent of taxable income, whichever is greater by 2010.

Beginning NOL Cap
2006 $2 million
2007 $5 million
2008 $7.5 million
2009 $10 million
2010 Greater of $10 million or 75% of taxable income
and thereafter

The measure also includes a series of graduated increases in the Corporate Net Income Tax apportionment formula. The three-factor apportionment formula consists of property, payroll and sales factors.

Currently, Pennsylvania applies this three-factor apportionment by triple-weighting the sales factor in the formula. As a result, the sales factor accounts for 60 percent of the apportionment formula, and the property and payroll factors each account for 20 percent. HB 515 would phase in a Corporate Net Income Tax apportionment formula to 100 percent sales by 2010 to encourage companies to build facilities and increase payroll in Pennsylvania

Beginning Sales Property Payroll
2006 60% 20% 20%
2007 70% 15% 15%
2008 80% 10% 10%
2009 90% 5% 5%
2010 100% 0% 0%
and thereafter

Pennsylvania has been called unfriendly to business since its tax structure stifles economic growth and is a detriment to our efforts to attract new companies. We must turn that around. By cutting these taxes, we send a message that Pennsylvania is a good place to live and do business. We must foster growth and job development and create good-paying jobs,” said Senator Thompson

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