Thursday, July 31, 2014
Inquirer Daily News

Could PA scrap business income tax?

State Sen. Anthony Williams pushes a business-receipts tax plan he says will enable Pennsylvania to scrap its 9.9% business tax rate, one of the nation's highest

Could PA scrap business income tax?

State Sen. Anthony Williams, D-Phila., might be best-known upstate for joining Republicans to push a private-school vouchers-for-the-poor and expanded-tax-credits-for-middle-class-private-school-scholarships bill toward Gov. Corbett.

Now he's taken on a second maverick quest: to reform the state's business taxes.

Today Williams stood with Philadelphia City Council members Bill Green and Maria Quinones-Sanchez at City Hall to promote an Ohio-style Commercial Activity Tax (CAT) that would levy taxes on business sales in Pennsylvania, scrapping the state's current sky-high 9.9%-with-many-exceptions business tax.

Williams says he'll propose a bill next week. He won't say what the rate will be - but he says he wants it to raise more money than the income tax does - and says CAT can do that without clobbering PA companies, becuase it will be imposed, not just on profitable locally-based firms like the income tax, but on firms from everywhere that sell goods and services to Pennsylvanians.

Williams says he's sent the idea to Gov. Corbett - no reply yet - and discussed it with hotel and real estate industry reps

Can this really happen? Hotel-keepers, construction lobbyists and Mayor Nutter shot down Green's and Quinones-Sanchez's similar attempt to eliminate Philadelphia's corporate income tax and replace it with a higher gross-receipts tax. They fell short even when they exempted tens of thousands of small businesses (which Williams isn't promising to do.)

A quick call to Senate Republicans showed no awareness, so far, of the Williams plan.

"I wouldn't say it's a bad idea," said Nathan A. Benefield, policy research chief at the business-oriented Commonwealth Foundation. "Pennsylvania currently has gross-receipts taxes in a couple of areas, like electricity and cell phones."

Though a straight CAT would affect "low-margin businesses" like grocery stores disproportionately, Benefield adds. Anyway, his group wants to cut business taxes, not just change who pays them.

How's that tax working in Ohio? Williams cited two favorable Ohio state reports: http://www.ohiomeansbusiness.com/incentives-and-tax-reform/tax-climate/ohio-tax-reform-year-2-in-review/impact-of-ohios-tax-reform.php and  http://obm.ohio.gov/MiscPages/MonthlyFinancialReports
On the other hand, Benefield referred me to two reports by the Tax Foundation, both critical:
http://www.taxfoundation.org/research/show/25674.html and http://www.taxfoundation.org/blog/show/23635.html

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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