The Pennsylvania State Senate Finance Committee approved legislation (SB 771) to reduce the state’s Corporate Net Income Tax (CNIT) rate, the highest non-graduated rate in the country.
Gov. Tom Wolf, a former businessman, said the bill would reduce the CNIT from 9.99 to 7.99 percent on January 1, 2023, with a reduction to 6.99 percent in tax year 2026 on a path to 4.99 percent, with the legislation sponsored by State Senator Steve Santarsiero, D-Bucks County, and Representative Mary Jo Daley, D-Montgomery County, to pave the way for new business opportunities, jobs, and a stronger economy.
“In Pennsylvania, our Corporate Net Income Tax is one of the highest in the nation and it’s holding our commonwealth back,” Wolf said. “Businesses are asked to pay more than their fair share; it’s a barrier to new business growth and limiting opportunities for our workers and new student graduates.
“My plan to lower this tax on Pennsylvania’s businesses is an opportunity to support Pennsylvania’s businesses and families, to ensure that students can find good jobs, and to remove barriers to new business and innovation in the commonwealth,” he said.
The bill must pass the Senate and move through the House of Representatives before becoming law.
“Pennsylvania has too many attributes to consistently lose out to other states for investment and job growth, but that’s been the case for too long due in large part to excessively high CNI,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. “If reduced to a more competitive level, we can focus on enacting the policies that will jumpstart our economic recovery, train and retain a globally competitive 21st century workforce.”
According to the governor’s office, Wolf has put Pennsylvania back on track through sound fiscal management. Over the past seven years, his administration has turned a $2-3 billion structural budget deficit into a $2-3 billion budget surplus and built the Rainy-Day Fund to more than $2.8 billion, more than 12,000 times what it was when he took office.
Wolf will be the first governor since Dick Thornburgh, who left office in 1987, to turn over a budget surplus to his successor, the administration said.
In addition to reducing taxes, the legislation would also modernize the current structure to level the playing field for all businesses. Combined, this lower tax rate and modernization will immediately make the commonwealth more competitive with surrounding states and improve the overall business climate.
“It is past time we level the playing field for our Pennsylvania-based businesses,” said Santarsiero. “Fiscally, the commonwealth is in a position right now to improve our corporate tax system and set the stage for a more vibrant economy. The changes we are proposing today will support our local businesses and incentivize new start-ups in Pennsylvania.”
“Next year, when the CNIT is cut to 7.99%, over 95% of corporations will be held harmless or will get a tax cut, said Daley. “That leaves only five percent of corporations that will have a higher tax bill; and that would be the corporate taxpayers who do business inside and outside of Pennsylvania.”