The Pennsylvania Chamber of Business and Industry today applauded state lawmakers and Governor Tom Wolf for the passage of significant reforms to the Commonwealth’s tax structure, including a reduction to the state’s uncompetitive Corporate Net Income Tax rate and notable tax relief for small businesses.
“This monumental tax reform package is a win for businesses and the people of Pennsylvania,” said PA Chamber President and CEO Luke Bernstein. “Pennsylvania has so much to offer potential investors and entrepreneurs. These tax reforms instantly make us more globally competitive and allow us to focus on Pennsylvania’s strengths as a hub of global commerce and opportunity – our prime location, world-class educational institutions, innovative workforce and more.”
“We are proud to stand with the leaders of the House and Senate, Governor Wolf and other legislative champions of business who supported these vast improvements to our state’s competitiveness. This tax reform package, which was a top legislative priority for our organization for decades, is a major step towards showing that Pennsylvania is open for business and ready to chart a path toward a bright future for our state’s economy.”
For decades, Pennsylvania’s CNIT rate, which at 9.99 percent was the highest flat rate in the country, served as a barrier to growth. The budget cuts the rate in half over the course of the next nine years – starting with a full one percent reduction in 2023 to 8.99 percent and then phasing down each year by .50 percent until reaching 4.99 percent in 2031. Based on current state corporate tax rates, the full reduction takes Pennsylvania from the highest CNI tax rate in the country to the sixth lowest by 2031 and is the first change in the rate since 1995 – giving our economy a vigorous boost in our post-pandemic recovery.
The benefits of a more competitive business tax code go far beyond just improving the state’s business climate. Studies have shown that a decrease in the corporate tax rate leads to increased GDP, higher wages and increased home values, all of which create family sustaining jobs and attract and retain new talent.
The newly passed tax reform package also includes additional relief for small businesses, affording businesses the opportunity to defer personal income tax liabilities through “like-kind exchanges” of certain property – another long-sought after member-centric goal of the PA Chamber. This provision allows employers to invest in the job-creating assets businesses need to stay competitive. Previously, Pennsylvania was the only state in the country that did not offer this type of deferral. An additional component of the package aligns the state Tax Code with federal tax law by allowing small businesses to deduct qualifying equipment purchases from personal income tax liabilities, just as federal tax law provides for under Section 179. This change makes it easier for employers to buy equipment and invest, which in turn promotes job growth.
“This long sought-after overhaul of Pennsylvania’s business tax structure would not have been possible without a bipartisan, collaborative effort,” Bernstein added. “We thank our legislative leaders for working with Governor Wolf and ensuring this tax reform package was part of this year’s budget, prioritizing the Commonwealth’s competitiveness and working alongside the Chamber, together for Pennsylvania. We look forward to seeing the Governor sign this historic reform into law. In a time when compromise can be elusive, this bipartisan measure is a good illustration that by working together, we can put Pennsylvania jobs, businesses, and investment first and chart a path towards a brighter future for our Commonwealth.”
###
The Pennsylvania Chamber of Business and Industry is the state’s largest broad-based business association, with its statewide membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.