The Pennsylvania Chamber of Commerce has responded to our recent op-ed about corporate taxes with a letter to the editor and makes two points, to which I will reply.
First, it says that the Delaware loophole was closed a number of years ago by legislation that created some of the add-backs Governor Wolf wants to put in place this year. Our answer: if that legislation really closed the Delaware loophole, then more add-backs and / or combined reporting wouldn’t have any effect and the Chamber would have no reason to oppose them. The proof that the Chamber is blowing smoke is that it opposes further efforts to close the Delaware loophole because its members know that the loophole is still open and closing it would make multinational corporations pay what they actually owe. The notion that combined reporting is complicated and would lead to lawsuits would be news to the 28 other states that have implemented it without complications or lawsuits.
Second, it says that if Pennsylvania were a tax haven, businesses would be flocking to the state. We never said Pennsylvania was a tax haven. We said that 73% of corporations pay nothing to the state and most of them are wealthy multinational businesses. The Chamber’s claim is misleading in two ways.
On the one hand, businesses choose NOT to invest more in PA because limiting their operations allows them to shift profits to affiliates in other states. By taxing corporations that sell in PA, no matter where they are located, combined reporting would actually increase the incentive for them to move to our state.
On the other hand, what keeps businesses out of Pennsylvania is not our taxes, it is our crumbling infrastructure and a workforce that is no better educated than workforces in states like Mississippi and West Virginia. We are near the bottom of the list of states in terms of the number of adults with a college degree. We underinvest in non-college secondary education. We are falling behind in pre-K. Only 11% of Pennsylvania K-12 students go to an adequately funded school. Businesses are looking for good infrastructure and a highly educated population. Cutting corporate taxes would make it harder to create both.
Frankly, these arguments are nonsense. There is not a shred of good reasoning or evidence behind them. But I guess when you try to “convince” legislators, mostly by giving them campaign contributions, you get out of practice of making good arguments and marshaling evidence.