Pennsylvania's elimination this year of its capital stock and foreign franchise tax, after two years' delay, drove an improvement in the state's tax ranking to 24 from 28, the nonpartisan Tax Foundation said Wednesday in its annual ranking of state business tax climates.
The tax, on the books since 1844, is on the value of a firm, rather than on its profits or even on its revenue, which made it a much-loathed levy in the business community.
On 14 states have a capital stock tax, and "Pennsylvania was one of the last states outside of the south to have one," said Jared Walczak, a policy analyst with the Tax Foundation.
Despite the significant improvement, Walczak found much to criticize about Pennsylvania business taxes. Not only does the state have one of the nation's highest corporate tax rates, it also has some unusual features.
"Only one other state caps the amount of losses that a company can carry forward from one year to the next," Walczak said.
Another knock on Pennsylvania business taxes is the structure of its unemployment insurance. It has a high maximum rate, and it takes longer for rates on individual companies to improve after they have layoffs.