State Officials, Business Leaders Tout Reduction in Pennsylvania Corporate Net Income Tax
By Colin McEvoy on November 3, 2022
State and local elected officials and business leaders gathered to discuss the positive benefits of the recently enacted reduction in the state of Pennsylvania’s corporate net income (CNI) tax rate.
The state’s 9.99% corporate net income tax rate, currently the second largest in the nation, will drop to 8.99% as of Jan. 1, 2023 under the new legislation approved this summer, then will gradually reduce each year in phases until 2031, when it reaches 4.99%.
The Pennsylvania Chamber of Business and Industry hosted a Nov. 3 roundtable discussion, where both private and public sector leaders agreed the change will help fuel economic development across the Commonwealth and make Pennsylvania more competitive against other states.
“As a global medtech company, I can say this change is very meaningful, and will allow Olympus to more aggressively pursue our goals to grow our business by making both organic and inorganic investments that will create jobs in Pennsylvania,” said Christopher Kuhn, CFO of Olympus Corporation of the Americas. “This change will also encourage businesses to not only stay in Pennsylvania, but for them also to move to Pennsylvania.”
The roundtable discussion was held at the Lehigh Valley Economic Development Corporation office. A reduction of the CNI had long been on a list of economic policy proposals supported by the organization, according to LVEDC President & CEO Don Cunningham.
“We appreciate the efforts of our Lehigh Valley legislators in helping pass this bipartisan bill, which will ultimately benefit all businesses and residents of the state,” Cunningham said. “Reducing the corporate net income tax will have a positive effect on our efforts to attract more businesses to locate and expand in the Lehigh Valley and throughout Pennsylvania.”
The CNI in Pennsylvania had remained unchanged since 1995, and had been the highest in the nation behind only New Jersey’s 11.5%. By contrast, it will become the eighth lowest once it is fully reduced by 2031, according to Pennsylvania Chamber President & CEO Luke Bernstein.
“We are here today as proof that great things happen when we work together for Pennsylvania,” Bernstein said. “For years, Pennsylvania has had the second-highest corporate net income tax rate in the country, which stood as a giant stop sign to companies considering moving and investing here. This tax reform package is an important first step in making Pennsylvania more competitive and showing the world that we’re open for business.”
C.F. Martin & Co was among the Lehigh Valley companies to attend the event and voice support for the CNI reduction. Nathan Eckhart, the company’s CFO, said the CNI disparity between Pennsylvania and other states has been an issue for decades,
“What this tax reduction will do for businesses is allow us to keep more of the funds that we’re generating and continue to invest that in capital, including in our workforce through training and other things,” Eckhart said. “It will provide more value and provide us an increased ability to hire more skilled workers as we move forward and continue to grow our business.”
The benefits of a more competitive business tax code go beyond improving the state’s business climate. Studies have shown that decreasing the CNI leads to increased GDP, higher wages, and increased home values, all of which create family sustaining jobs and attract and retain new talent, according to Governor’s Action Team Executive Director Brent Vernon.
“It’s great to be here today to celebrate these historic tax reform changes,” Vernon said. “Events like this one give us the opportunity to get the message out to business leaders and entrepreneurs everywhere: Pennsylvania is an even better place to do business because of these tax reforms championed by Gov. Tom Wolf, the Pennsylvania Chamber, and our other partners.”
The tax reform package also allows small businesses to defer personal income tax liabilities through “like-kind exchanges” of certain property, allowing employers to invest in the job-creating assets needed to stay competitive, Bernstein said. Previously, Pennsylvania was the only state in the country that did not offer this type of deferral.
Additionally, the tax package aligns the state Tax Code with federal tax law by allowing small businesses to deduct qualifying equipment purchases from personal income tax liabilities, he said. This change makes it easier for employers to buy equipment and invest, which in turn promotes job growth.
Other roundtable attendees included Bethlehem Mayor J. William Reynolds; state Sen. Pat Browne; state Reps. Milou Mackenzie, Ryan Mackenzie, Peter Schweyer, Mike Schlossberg, Zach Mayo; Frank Facchiano, COO of the Greater Lehigh Valley Chamber of Commerce; Martin C. Levin, of RLB Accountants; Skip Cowen II, co-founder of Cornerstone Advisors Asset Management.
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