Bad Budget for Business

Lowman Henry calls out the PA Senate GOP for its budget deal, from many of the same reasons we did – it represents breaking their pledge not to raise taxes, and is so doing, further harms Pennsylvania’s economic climate:

It is the CSFT phase-out roll-back that is the most harmful. Most Pennsylvanians have never heard of and will never actually pay the Capital Stock and Franchise Tax. That makes it a prime target for increasing as it directly impacts a relatively small group of taxpayers. But, the tax is particularly hurtful to businesses at a time when virtually all are attempting to survive a severe economic recession. Making matters worse, the higher CSFT rate will be retroactive to the first of January. That means businesses have operated for nine months assuming one rate, but under the agreement would be forced to pay a higher rate.

Pennsylvania’s business climate rates at or close to the bottom of every survey of economic competitiveness among the states. One of the chief factors making Penn’s Woods an undesirable location for business is high taxes – specifically the Capital Stock and Franchise Tax (an assets tax), which is paid in addition to the Corporate Net Income Tax.

He also notes the political ramifications for the deal:

Recall these words from Senator Scarnati to Pittsburgh Tribune-Review columnist Brad Bumsted last December when he said if Republicans vote to raise taxes, “what’s the reason to vote for us.”

Indeed, I heard one Republican state senator on the radio last Friday defending the deal, saying it was impossible to do better without a Republican governor (implying Pennsylvania should elect a Republican governor in 2010).  But why should anyone expect a GOP governor to hold the line on taxes when the GOP-dominated Senate won’t?