Gov. Tom Corbett was one of only four governors to get an “A” in Cato Institute’s Fiscal Policy Report Card on America’s Governors. Corbett was joined by Govs. Sam Brownback of Kansas, Tim Scott of Florida, and Paul LePage of Maine.
Says the report, authored by Chris Edwards, of Gov. Corbett:
Former state attorney general Tom Corbett has followed a fiscally conservative path as governor. His two budgets have been fairly frugal with general fund spending in fiscal 2013 expected to be lower than in fiscal 2011. State government employment is down a bit under Corbett, and he wants to privatize Pennsylvania’s government-run wine and liquor stores. He says, “I don’t believe we belong in the business of selling alcohol. It’s that simple.”
Corbett has also focused on business tax reform. He signed a repeal of the state’s inheritance tax on farmers, and he signed a reform in corporate tax apportionment rules. But Corbett’s main fiscal achievement is to push ahead with ending Pennsylvania’s Capital Stock and Franchise Tax, which is paid by about 100,000 businesses. Phasing out the tax had been planned for years, but delayed by previous governors worried about losing revenue. Corbett has sliced the tax from $819 million in 2011 to an expected $479 million in 2013, and he plans to fully repeal it by 2014. Corbett argues: “This tax is a job-killer . . . We don’t need it. We don’t benefit from it, and we must get rid of it.”
An accountant described the state’s business tax problem: “Pennsylvania has a corporate income tax rate of 9.99 percent. Only Iowa, with a graduated rate that can reach 12 percent,
has a higher rate. Coupled with Pennsylvania’s Capital Stock tax, which is levied on assets, not income, the state hits companies twice, while many other states do not.” Since the Capital Stock and Franchise Tax is based on asset values, it hits companies every year whether they are profitable or not.
An economic advisory panel formed by Governor Corbett recently recommended cutting the corporate tax rate, so hopefully that will be the next item on the governor’s reform agenda.
As we’ve noted, Gov. Corbett’s first budget was the first in more than 40 years to actually cut spending, and he, along with lawmakers, should be applauded for efforts to prepare for the four alarm fiscal fire facing the state. The next challenge will be to lower Pennsylvania’s onerous state and local tax burden (currently 10th highest in the nation). Indeed, this tax burden is one reason why Yuengling recently announced it would likely build its next brewery outside of Pennsylvania.