Special Interest Tax Break Will Cost $100 Million, Make Tax System Less Fair

|

Tom Wolf called on the Governor and state Legislature today to reject a special interest tax break that will take Pennsylvania in the wrong direction, add to the state deficit, and set back comprehensive tax reform efforts. Sharon Ward of The Pennsylvania Budget and Policy Center states: “Pennsylvania cannot give away millions in tax breaks when it is needed to keep libraries open, hospitals running and schools educating our children.”

Former Revenue Secretary and respected business leader Tom Wolf sent a letter to the Governor and Legislature asking them to reject a special interest tax cut that is being considered by some state budget negotiators.

HARRISBURG, PA (August 6, 2009) – Former revenue secretary and business leader Tom Wolf called on the Governor and state Legislature today to reject a special interest tax break that will take Pennsylvania in the wrong direction, add to the state deficit, and set back comprehensive tax reform efforts.

Some state budget negotiators have set the tax change, known as the Single Sales Factor, as “the price” for a temporary delay in the Capital Stock and Franchise Tax phase-out, one of the proposals on the table to solve Pennsylvania’s budget crisis. The Capital Stock and Franchise Tax phase-out was previously delayed after the 2001 recession to help reduce a revenue shortfall during former Governor Mark Schweiker’s tenure.

The single sales factor tax change would cost about $100 million in 2009-10 – roughly what the state spends on the Children’s Health Insurance Program or military and veterans’ affairs programs.

“Pennsylvania needs broad-based tax reform,” Mr. Wolf said. “That’s what will make Pennsylvania more competitive. Special interest tax breaks take us in the wrong direction.”

The tax break has long been sought by a small group of businesses, including PPG Industries, Hershey Foods and U.S. Steel. About twice as many companies doing business in Pennsylvania will pay more under this plan than will see a tax break. Nearly half the gains will go to only 4% of all affected companies.

Companies doing most of their business in Pennsylvania will not benefit from the tax break. For instance, Hershey Foods will see a tax break because most of their sales are outside Pennsylvania, but Hershey’s in-state suppliers will not benefit at all.

There is little evidence from other states that this type of tax break has created new jobs. In fact, several states have experienced manufacturing job losses after enacting it.

The loss in revenue would come at a time when Pennsylvania is already facing a multi-billion-dollar budget shortfall.

Sharon Ward, director of the Pennsylvania Budget and Policy Center, said citizens and businesses should share responsibility for resolving this shortfall. Instead, special interest tax breaks are on the table that would siphon more money away from needed investments in education and essential services.

“We just can’t afford this,” Ward said. “Pennsylvania cannot give away millions in tax breaks when it is needed to keep libraries open, hospitals running and schools educating our children.”

“It will force more of the cost of public services onto small businesses and individual Pennsylvania taxpayers,” she added. “The General Assembly should be closing tax loopholes, not adding new ones.”

Read Mr. Wolf’s Letter

Read PBPC Reports and Briefing Papers on Single Sales Factor

Read an Overview of Pennsylvania’s Winners and Losers

print