Issues
Improvements to Pa.'s tax structure would result in more jobs for Pennsylvanians
Did you know that Pennsylvania actually penalizes business for creating jobs and having facilities in the state?! Hard to believe, but it’s true.
That’s because the state doesn't just tax a company on how much they sell, it also taxes them on how many employees they hire, and the size of their plant and any expansions and upgrades they make. This places Pennsylvania-based companies at a competitive disadvantage over out-of-state companies that also sell products and services in Pennsylvania - some of which might be direct competition!
Job growth and investment in Pennsylvania can be fostered by basing the corporate taxes on 100 percent of sales - known as a Single Sales Factor. This would remove the penalty for creating jobs and making investments in businesses that currently exist here in Pennsylvania - and to making the decision to locate here!
Pennsylvania’s tax structure also makes it difficult for new companies to get up and running and for others in certain industries to keep their doors open. The reason: the cap on the amount of losses employers can use to offset their taxes.
Consider this. Because of the difficulty in starting a business, a vast majority of new, small companies today will face significant losses in their first few years of operation. Likewise, cyclical businesses face regular fluctuations in income as part of their business and are particularly vulnerable to economic slowdowns.
48 other states and the federal government allow businesses to deduct 100 percent of their losses in the following tax year. But Pennsylvania caps losses. Eliminating the cap on Net Operating Losses would help business start-ups and cyclical businesses become and remain viable job creators in the state.
Think about it. These two commonsense reforms - adopting a Single Sales Factor and eliminating the cap on Net Operating Losses - would remove significant barriers to job creation and retention in the Commonwealth.
Busting the myths about business taxes…read more
Busting the myths about business and taxes
Did you know?
- Although corporate taxes are invisible to the average taxpayer, they quietly tap family pocketbooks for nearly $370 billion per year. To meet the tax burden, businesses raise prices, lower wages or show poorer returns on investments. Each American household pays $3,190 on average in corporate income taxes per year.
- Lowering tax rates doesn’t necessarily mean there will be reduced revenue coming into the state. In fact, more competitive tax rates can actually increase revenue into state coffers. For example, over the past 10 years, Pennsylvania has been steadily lowering the rate on its tax on business assets – the Capital Stock and Franchise tax – and during that time, revenue generated by this tax has increased by 23 percent! Lowering the rate freed up money for business to invest into growing their operation, purchasing equipment and hiring more people. That ultimately can mean more revenue for the state.
When people say business doesn’t pay enough taxes, consider these:
- Pennsylvania businesses contribute $23.4 billion in total state and local taxes, the sixth highest in the nation!
- In Pennsylvania over the past five fiscal years, corporate tax collections have increased 46 percent and are the fastest growing revenue component of the state’s budget.
- Businesses finance 42 percent of state and local government operations in the Commonwealth.
