Corbett+budget+guidelines+forecast+400-million-plus+in+business+tax+cuts

= = =By Peter L. DeCoursey= =//Published by Capitolwire//= =//8/22/11//= = = = = =HARRISBURG (Aug. 22) – Gov. Tom Corbett wants to reduce current state spending in next year’s budget so he can afford to pay for mandated spending hikes and an estimated $400 million in new business tax cuts.=

=Republican legislative leaders agree with that idea and policy direction, while Democrats say business tax cuts should be tied to making those measures produce jobs, not just greater profits for businesses.=

=The governor’s budget program and policy guidelines, issued to the departments and agencies whose budget he controls, also set out where spending may increase. It notes that over the last five years, corrections and Medical Assistance costs rose an average of $280 million a year. While Corbett is pushing hard for each department to come in well below that kind of increase this year, and trying to cut $400 million from welfare, other costs have to be budgeted.=

=Budget Secretary Charles Zogby said those include the state’s higher contribution in the 2012-2013 budget to the teacher’s pension funds: $315 million.=

=The other big additional costs the administration foresees and supports are additional business tax cuts.=

=The budget policy and program circular states: “Historically, Pennsylvania has not been competitive in terms of its business tax climate. With the 2011-12 Budget, we have begun to distance ourselves from this distinction with the reinstatement of the phase-out of the Capital Stock and Franchise Tax (CSFT). Much work remains to be done to remove our tax structure as an impediment to job creation and innovation.=

=“Continuing the phase-out of the CSFT is estimated to cost approximately $300 million in 2012-13. We will work to initiate a 0.5% reduction in the Corporate Net Income tax, the highest in the nation, which would cost more than $100 million. Another priority, a graduated reduction in the Inheritance Tax, which would support increased investment in family businesses and farms, is estimated to cost over $10 million.”=

=Zogby said except for the Capital Stock and Franchise tax, the other two taxes were put in for “illustrative purposes,” to show what it would take to cut those levies. He emphasized that final decisions on which business taxes to cut would be made with the Legislature.=

=But administration sources did suggest that the corporate net income tax’s high rate hurts the state because companies and business location headhunters use it as a shorthand measure of a state’s tax climate.=

=Historically, when business-tax-cut funds have been available, reducing that levy has lost out to reducing the capital stock tax, and to changes in tax provisions that companies say “gives them more bang for the buck,” said Senate President Pro Tem Joe Scarnati, R-Jefferson.=

=Those other tax reductions historically favored by the business community, Scarnati said, including increasing the percentage of tax that is based on sales, not production in the state, known as the Single Sales Factor, and increasing the amount of past losses companies can count against future year profits. That is known as the Net Operating Loss carry-forward, or NOL.=

=Corbett campaigned on cutting all four taxes, giving the most emphasis to moving the state back to its suspended plan of phasing out and eliminating the capital stock tax.=

=Scarnati said: “We would totally agree with that plan for the Capital Stock and Franchise Tax, and moving down the CNI is totally acceptable. Doing that in a year of federal cuts would be a terrific achievement.”=

=Scarnati added: “We have to have some real meaningful discussions about the cuts, about where we put the dollars and where we don’t,” but said tax cuts were also a high-priority.=

=House Minority Leader Frank Dermody, D-Allegheny, disagreed.=

=“How can you do business tax cuts when nobody’s ever shown those tax cuts create jobs? But people who are disabled, we know they will no longer be able to have services, kids will lose teachers and classes. We know that will happen.=

=“How do you cut public education and give these businesses these tremendous tax cuts without tying tax cuts to insisting on creating jobs? Why give them these kinds of tax breaks, when major corporations are doing well, they are making money, but they are not hiring anybody and now you want to give them tax cuts? To continue to help the wealthy and hurt those who lost services? That just doesn’t make sense. I don’t see a plan for creating jobs.”=

=Scarnati and Senate Appropriations Committee Chairman Jake Corman, R-Centre, disagreed, saying business tax cuts would stimulate the economy and create jobs.=

=Both said they looked forward to discussing with Gov. Corbett and business community advocates what the best mix of tax cuts would be, since revenues will be limited in next year’s budget.=

=Scarnati said: “The Capital Stock and Franchise Tax has a broader result of helping Pennsylvania businesses. When you do that, single sales and NOL for PA businesses, it works better for companies here. But the CNI is what the headhunters look for when they want to locate companies here. So that is a good discussion to have with the governor and the business community.”=

=Corman agreed, also noting, “This is a good discussion to have, but it is just too early to say what kind of revenues we are going to have. But it is good to discuss what has the biggest impact, because obviously we want to make the tax cuts that help the most.”= = = =News= =home=