The Pittsburgh Post-Gazette recently published a letter to the editor from PA Chamber Director of Government Affairs Neal Lesher correcting misconceptions about Pennsylvania’s tax structure and the impact of mandatory combined reporting on businesses.
Full text of the letter is shown below.
The Post-Gazette’s recent editorial, “Shapiro corporate tax plans are a good starting point to avoid budget blues” (Feb. 16), overlooks key facts about Pennsylvania’s tax structure and the real impact of mandatory combined reporting.
The so-called “Delaware loophole” was closed more than a decade ago when the General Assembly authorized the Department of Revenue to add back to business’s tax liability any interstate transactions made for tax avoidance.
Since then, multiple reforms — like federal tax law changes in 2017 and bipartisan state tax reforms in 2022 — have expanded Pennsylvania’s corporate tax base by hundreds of millions of dollars. In fact, corporate net income tax collections have surged, up 92 percent in just the past five years.
Additionally, mandatory combined reporting wouldn’t create the sort of revenue windfall proponents claim. A 2010 National Conference of State Legislatures study found no evidence that combined reporting increases tax revenue. More recent studies in Maryland, Indiana and Virginia show that it can actually reduce revenue or create unpredictable swings.
Meanwhile, the complexity of compliance would discourage multi-state firms from investing in Pennsylvania.
Instead of making our tax system more burdensome, lawmakers should build on recent bipartisan reforms that lower rates and simplify compliance — proven ways to make Pennsylvania more competitive for job growth and investment.