(The Center Square) – A long-sought reduction in the corporate net income tax may get expedited, either through the Legislature or as part of the budget negotiation process.
Pennsylvania has one of the highest corporate net income taxes in the country.
It sat at 9.99% until January when Act 53 of last year lowered it to 8.99% and will reduce it to 4.99% by 2031. Healthy tax revenues, though, have encouraged Republicans to speed up the reduction.
As a result, Sen. Ryan Aument, R-Lititz, has introduced Senate Bill 345 to expedite the reduction by reducing the corporate net income tax to 4.99% by 2026. On Tuesday, the Senate Finance Committee passed the bill 8-3, reporting it out of committee for full consideration of the Senate.
Aument’s bill would immediately reduce the corporate net income tax to 7.99%, then lower the rate by 1 percentage point every January until it hits 4.99% in 2026.
Four months of tax collection data has shown that corporate net income tax revenues are doing better than when the tax rate was higher.
The Independent Fiscal Office reported that corporate net income tax revenues were $874 million in April, compared to the IFO’s estimate that collections would be $550 million. Since the tax rate cut in January, corporate net income tax revenues have been $680 million higher than the fiscal office’s initial estimates made in September 2022.
“All the data we have since we cut the rate in January shows that reducing rates increases revenue for the state and makes Pennsylvania more economically competitive and ensures it is an attractive place to live and work,” Republican Sens. Aument, Tracy Pennycuick, Greg Rothman, and Judy Ward said in a press release. “Passing this bill will improve the economy and help working families much faster. Why should we wait?”
The accelerated timetable found support among Democrats as well, but not unanimously.
Sen. Art Haywood, D-Abington, said “we need labor policies, not tax policies” to attract and retain workers in Pennsylvania. He also cautioned about rushing to reduce the tax rates when some projections expect state tax revenues to fall.
Haywood, along with Sen. Wayne Fontana, D-Pittsburgh, and Sen. Katie Muth, D-Royersford, voted no on the bill. But not all no votes on the bill opposed speeding up the tax reduction.
“I’m for accelerating if we can do that,” Fontana said, “I just think we need to do it as part of the budget and part of the negotiation – maybe we could reduce it even further, maybe it’s a year longer, but I think the prudent thing to do would be to make it part of the budget process.”