Revitalizing Pennsylvania’s economy begins on Main Street
We have long known that Pennsylvania has not done a good job providing a hospitable environment for businesses of any size. With the second highest Corporate Net Income (CNI) tax in the country, and a gaping loophole that allows 76% of businesses currently operating in Pennsylvania to pay no taxes to the Commonwealth at all, we are provided with several opportunities to fix what has long been broken. With common sense, growth-oriented policies, we can lay the foundation for an economy in which both our businesses and working families can prosper.
First, we must lower our CNI. Currently, we’re taxing the few businesses that actually do pay taxes here at 9.9 percent. It’s no wonder that they do everything in their power to avoid paying and that our state has struggled to attract the new investment we so desperately need. We propose lowering the CNI by two to four percent, dependent on the size of the business, with small businesses seeing the largest reductions.
Second, like many other states across the U.S., we must close “the Delaware Loophole,” which results from our policy of Separate Reporting. Currently, nearly 76% of businesses use this loophole to avoid declaring the income they’ve earned in the Commonwealth, and therefore avoid paying income tax. This results in the remaining 24% of businesses, which are almost entirely small businesses, having to carry the burden of a tax rate that attempts to offset the overwhelming majority who are paying nothing. If everyone doing business in the Commonwealth paid their fair share, there would be no need for our egregiously high CNI.
We propose implementing Combined Reporting instead, which would force businesses that actually operate and earn revenue in Pennsylvania to pay their fair share of taxes to Pennsylvania. This much-needed revenue would go a long way towards helping us to raise the minimum wage, fund education, workforce development, infrastructure, healthcare, and other basic necessities. By having all businesses pay their CNI, we would increase Pennsylvania’s revenue by $200M-$400M while simultaneously lowering the tax rate in a way that will greatly help our existing small and mid-sized businesses, while finally making Pennsylvania attractive for all new business.
The COVID-19 pandemic has clearly demonstrated that our economy was robust but not resilient. Nowhere is this more evident than in the case of our small businesses, which are the backbone of our communities. Over 98 percent of all US businesses have fewer than 100 employees, and they employ one-third of the workforce. Unlike any past U.S. economic downturn, this one is poised to decimate Main Streets everywhere, which is why legislators must act with intention and pursue swift implementation of these types of reforms.
A critical and necessary step to help our small businesses to remain afloat during this downturn and afterwards is a short-term rent postponement and a longer-term freeze on rent increases until we are out of the worst of this crisis and the economy begins to stabilize. Going forward, small business lease rates should be determined through a clear and fair arbitration process between tenant and landlord which would ensure an approach that is both equitable and market-based. Other states are adopting these policies for their business owners, as well as providing up to $1,000 in tax credits per employee to small businesses with 10 or fewer full-time equivalent employees in the state. We can and should do the same.
Given the unique and critical role that small businesses play in driving local economies and defining a community’s character, we are calling for the establishment of a small business committee in the state legislature. This body must be dedicated to ensuring that there is ample and adequate legislation to protect, encourage, and strengthen our state’s economy through the creation of new policies and expanding those that address the very specific needs of our small businesses.
If elected, I will work with anyone, of any party, to fight for policies that will see our businesses and working families through this pandemic and position all Pennsylvanians to prosper. Creating a resilient and sustainable economy will require investment in our companies and our people, and a new business climate that is welcoming and fair.
Only when the State and our businesses work together to enable the citizens of the Commonwealth to achieve dignity and earn economic freedom will we finally have a thriving 21st century economy.