Lawmakers in the Pennsylvania Senate voted along party lines Wednesday to approve a measure that would cut the state’s corporate tax rate as lawmakers face pressure from business groups ahead of the state’s June 30 budget deadline.
Supporters of the proposal said lowering the rate would make the state’s tax climate more business-friendly and attract more employers and jobs to the state. They also argued that it could help reverse the state’s population decline, which recently resulted in the loss of a congressional seat.
Lawmakers from both parties agreed that the state’s corporate tax rate needs to be reduced, but they did not agree on the finer details of the proposal considered on Wednesday.
The legislation, which was approved with a 31-19 vote, would lower the state’s 9.99% Corporate Net Income Tax rate to 6.99% by 2025. The bill would create a pathway for the rate to be lowered to 5.99% beginning in 2026 if the state exceeds revenue projections outlined by the state’s Independent Fiscal Office.
“This is the time to advance public policy that will position Pennsylvania for economic success and Pennsylvanians for upward economic mobility for generations to come,” said state Sen. Ryan Aument, a Lancaster County Republican who authored the bill. “Without question, the benefits of the CNI tax reduction will reach well beyond the next few months and ensure Pennsylvania thrives in the long term.”
Aument said Pennsylvania “consistently ranks amongst the worst states for business,” a statement he attributed to the state’s Corporate Net Income Tax rate.
Democrats in both chambers of the General Assembly have largely supported measures to lower the rate, though they have wanted to couple a rate reduction with other legislative language that would close tax loopholes and limit large corporations from shifting profits out of the state.
State Sen. Katie Muth, a Democrat representing Berks, Chester and Montgomery counties, attempted to amend such language into Aument’s bill on Wednesday but was unsuccessful. Muth said her proposal would “ensure that everyone doing business in Pennsylvania – all companies – pay their fair share in taxes.”
Two Democrats, state Sens. Lisa Boscola and Marty Flynn, voted in favor of Aument’s proposal.
Gov. Tom Wolf, a Democrat, has also supported a corporate tax reduction, which he has included in recent budget proposals. He previously supported combined reporting requirements, which would treat parent companies and subsidiaries as one corporation for tax purposes, allowing the state to tax a share of the combined income. However, Wolf dropped combined reporting requirements in favor of some other corporate tax changes in his most recent budget proposal.
Earlier this year, a spokesperson for Wolf said he supports corporate tax law changes outlined in House Bill 2510, which aims to prevent businesses from shifting taxes out of the state by updating “addback” provisions and “economic nexus” rules.
Aument’s legislation, Senate Bill 771, now goes to the House for consideration. Senate lawmakers also approved Senate Bill 447, sponsored by state Sen. Michele Brooks, which would lower the state’s Corporate Net Income Tax to 6.99% by 2027. That legislation will also be sent to the House, where it will be referred to a committee for consideration.