Originally published at RealClearPolicy
In his final annual budget address, Pennsylvania governor Tom Wolf proposed a major reduction in the state’s corporate income tax. Wolf’s tax-cut plan may come as a surprise to some, considering his liberal bona fides, and has been lauded by business groups desperate for relief from the second-highest business tax in the nation.
With the state House and Senate controlled by Republicans, it might seem like this tax cut would sail through to passage. But don’t be fooled. A corporate tax-cut proposal from Wolf is nothing new. This is the sixth time he’s included such a cut in his state budget proposal, and this one is similarly laced with “poison pill” provisions.
Past proposals have included mandatory unitary combined reporting, which would enable the state to tax a portion of a company’s income, including what is earned outside of Pennsylvania. Wolf based this maneuver on the “Delaware loophole,” which alleges that companies dodge taxes through sham payments to affiliates in other states. But there is no such loophole in the law, it doesn’t pertain to Delaware, and there’s no evidence companies are hiding profits through sham transactions.
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