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Three New Tax Breaks Will Cost PA Schools and Services

7:31 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

private jet

Pennsylvania lawmakers are considering legislation that will give tax breaks to those who purchase private and corporate aircrafts

After making deep cuts to schools, early childhood education, and health and human services, Pennsylvania lawmakers are now considering new tax breaks that will largely benefit a small number of higher-income earners.

Last week, the Senate Finance Committee approved legislation that would create a new loophole in the state inheritance tax. It allows business owners to bequeath business assets tax-free to their heirs — an advantage unavailable to most hardworking Pennsylvanians who inherit a family home or car.

Over in the House, the Finance Committee voted 18-16 on Wednesday to approve a bill that would exempt sales tax on the purchase of private and corporate aircraft, jet parts, and aircraft maintenance and repair. A car or truck purchase will still be subject to sales tax, but those in the market for a private jet will get a tax break.

Finally, the House Commerce Committee is voting today on legislation that would reward investors in Pennsylvania start-up companies with a new tax credit that they can take even if they owe no state taxes. To qualify for the credit, the investor must have a net worth of $1 million or income above $200,000 a year.

Each bill, estimated to cost millions annually, could come up for votes before the House and Senate in the coming weeks. The Pennsylvania Budget and Policy Center has more on all three bills here.

These bills come on top of Governor Corbett’s proposal to enact a new round of tax cuts beginning in 2015 that will ultimately cost hundreds of millions from the state treasury and put profitable corporations first in line when future budgets are negotiated. It would be the latest in a series of costly special tax breaks over the decade that have undermined Pennsylvania’s ability to invest in schools and other vital services.

Pennsylvania can continue to fund special tax breaks like these or we can invest again in our children and our economic future — but increasingly we can’t do both. Unaccountable tax cuts undermine success in the classroom and growth in our communities, and they shift costs onto school districts, local governments, and property taxpayers.

Pennsylvania needs real tax reform that closes loopholes, ends special tax breaks, and levels the playing field for everyone. Only then can we enact a state budget that returns to tried-and-true investments in education and the services that promote long-term economic growth.

Read the rest of this entry →

State Tax Cuts Take a Bite Out of Pennsylvania’s Budget Pie

9:36 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Advocates delivered half a pie to every Pennsylvania legislator Tuesday. Why half a pie?

To remind them that a decade of large tax cuts for businesses has left schools, health care services, and local communities with a smaller share of the state budget pie.

Tax cuts enacted since 1999 have drained close to $3 billion this year alone from state coffers. The cost of the tax cuts has more than tripled since 2002, with little to show for it. Too often, these tax cuts are put in place with very little accountability or obligation for companies to create jobs. In fact, Pennsylvania ranked 27th in job growth in 1999-2000 but fell to 34th in 2011-12.

Budget cuts fueled by large business tax cuts also pass the buck to school districts and local governments – and onto local taxpayers.

Governor Corbett is now proposing a new round of tax cuts for 2015 and beyond that will cost as much as an additional $1 billion. The proposal includes no plan to close tax loopholes that allow companies to hide profits and avoid paying their share of taxes.

Pennsylvania needs a budget that returns to tried-and-true investments in education and the public infrastructure that promotes long-term economic growth. After a long economic downturn, that is the path to more jobs, stronger communities, and a brighter future for our children.

We can fund corporate tax cuts or we can fund our children’s schools, but increasingly we can’t do both. Giving larger slices of the pie to profitable corporations means less money in the classroom, fewer early childhood programs, and less support for local services.

Pennsylvania needs real tax reform that levels the playing field for businesses that play by the rules, and stops giving away dollars that are essential to helping our children and families succeed. Only then will we be able to invest in a world-class public education and the community assets that build a stronger economy.

Photo by Mr. T in DC released under Creative Commons License

A Decade of Deep Cuts in PA. Don’t Let It Happen.

12:27 pm in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Deep state cuts have already put health care at risk for kids and denied help to families struggling in this economy. They have put thousands out of work in schools, colleges, nursing care facilities and hospitals.

Think that’s bad? You ain’t seen nothing yet.

The Pennsylvania House may vote as soon as next week on a bill that will cut corporate taxes by close to a billion dollars by the end of the decade. More cuts to schools and health care will be next.

House Bill 2150 would close some corporate tax loopholes in Pennsylvania, but it is paired with big tax breaks for businesses. Even after counting new revenue from closing loopholes, this bill is a big money loser for the commonwealth.

The Pennsylvania Budget and Policy Center and Better Choices for Pennsylvania has an Action Page where you can send a message to your House lawmaker to reject this bill as is and to take steps to close tax loopholes more responsibly. Closing loopholes should not come at the price of budget deficits for years to come.

We’ve all seen the state budget headlines in recent months. 88,000 kids have had their public health coverage cut off. 14,000 Pennsylvanians have lost their jobs in schools and colleges. College tuition is rising, and help for families struggling in this economy is harder to come by.

Closing corporate tax loopholes could help Pennsylvania turn things around, but not if lawmakers pair it with business tax cuts that will cost us now and for years to come.

PA Tax Breaks Vs. Budget Cuts

12:37 pm in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Right now in Harrisburg, there is a debate going on over whether the state should make more cuts to schools, universities and protections for our children and grandparents. Unfortunately, the Governor has put forth a budget that would do just that.

The chart below from Better Choices for Pennsylvania compares existing tax loopholes with funding cuts that could be restored by closing loopholes. In each case, additional revenue could help fund vital services without raising taxes on the middle class.

PA Must Reads: Closing Tax Loopholes, Health Reform and Economic Austerity

7:46 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Associated Press this morning reports on competing efforts to close some tax loopholes in Pennsylvania.

After blocking similar efforts by Democrats in recent years, Republicans in Harrisburg now want to chip away at a couple of state tax provisions that benefit businesses…

A month-old bill backed by the leaders of the House Republican majority would attempt to close the so-called “Delaware loophole.” It would give the state Department of Revenue the power to stop firms — usually large, multistate companies — from using accounting sleight of hand to move profits out of Pennsylvania to a lower-tax jurisdiction in order to avoid paying the state’s 9.99 percent corporate net income tax.

To make it easier for business advocates to swallow, the bill would also take major steps long sought by the business community to lower business taxes, including gradually reducing the corporate net income tax rate to 6.99 percent in 2019…

At the same time, the Corbett administration wants to scale back part of a $73 million incentive for retailers that collect the sales tax and send it to the state in a timely fashion…

Under the proposal, retailers that get to keep 1 percent of the sales tax money they collect would be allowed to keep no more than $250 per month, which would bring another $41 million to the state in the fiscal year that begins July 1.

The Scranton Times-Tribune reports on benefits of preventive services made available by the Affordable Care Act.

More than 3.8 million Pennsylvanians have used at least one free preventive service — ranging from annual checkups to tests for specific types of cancer — offered through health care reform legislation in the past year, according to a study by U.S. Health and Human Services.

The Affordable Care Act requires many insurance plans to provide coverage without any co-pay or deductible costs for a variety of preventive health services, including screenings for colon cancer, mammograms, well-child visits and flu shots. The move is part of an increasing emphasis on providing care that helps to keep people well.

Finally, in case you missed it, we highly recommend this inventive but persuasive op-ed on economic austerity.

PA Tax Loophole Bill a First Step, More Needs to Be Done

12:30 pm in Uncategorized by ThirdandState

Welcome, or Goodbye to Loophole Land? (photo: sustainus, flickr)

Welcome, or Goodbye to Loophole Land? (photo: sustainus, flickr)

A blog post by Chris Lilienthal, originally published at Third and State.

Pennsylvania Representatives Dave Reed and Eugene DePasquale rolled out legislation today that would take a first step towards closing corporate tax loopholes in Pennsylvania.

Corporate tax loopholes have been a problem for a long time in Pennsylvania. They don’t create jobs but do drain needed resources from good schools, health care and infrastructure.

Representatives Reed, a Republican, and DePasquale, a Democrat, deserve credit for recognizing this is a problem and taking steps to address it.

The bill, however, takes a limited approach and leaves many loopholes open for companies to exploit. It should be strengthened to ensure that big profitable corporations cannot use other artificial means to shift profits out of state and dodge taxes.

Matthew Gardner of Citizens for Tax Justice tells Philadelphia Inquirer columnist Joe DiStefano that combined reporting would be a better approach to closing loopholes. Under combined reporting, corporate net income tax would be assessed against income earned in Pennsylvania from a parent company and all of its related businesses.

As Gardner says: Read the rest of this entry →

Another PA Corporate Loophole – This Time for Jets

8:07 am in Uncategorized by ThirdandState

A blog post by Chris Lilienthal, originally published at Third and State.

Private Jet (photo: melodysk/flickr)

Private Jet (photo: melodysk/flickr)

If you buy a car, a truck, or any other vehicle in Pennsylvania, you pay sales tax. But if you are one of the wealthy few in the market for a Learjet or a Gulfstream aircraft, you will be able to purchase it tax free under a bill introduced in the state House of Representatives.

House Bill 1100 would exempt the sale of private and corporate aircraft from the state sales and use tax. At a time when average Pennsylvanians are bearing the brunt of cuts in education and other vital services, the bill effectively creates a $10 million to $14 million annual taxpayer subsidy for individuals who buy airplanes for recreational purposes and for corporations that upgrade jets for executives.

The Pennsylvania Budget and Policy Center recently released a policy brief on HB 1100. Here are the highlights:

● This bill is a subsidy to the wealthiest Pennsylvanians. Few middle-class families or small businesses would benefit from it.

● The jets sales tax exemption is a big money loser for the state. It would drain funding from investments that help create jobs and build a strong economy, including transportation, public safety, good public schools and a robust system of higher education.

● There is no accountability to taxpayers if new jobs and economic growth promised by the aircraft industry in exchange for this tax break are not realized. The exemption would have to create 6,500 new jobs, with an average salary of $50,000, just to pay for itself. This is more than double the number of people currently employed in Pennsylvania’s aircraft industry.

● Only two states fully exempt non-commercial aircraft from sales tax, and one of those states — Massachusetts — is trying to get rid of the tax break.

● Tax loopholes are costly and don’t create jobs. West Virginia enacted a sales tax exemption for airplane repairs to lure jobs to that state, but it hasn’t worked. Pennsylvania, without this tax break, has seven times as many aircraft repair and maintenance companies as West Virginia, employing more than twice as many people.

● This is a tax break that Pennsylvania cannot afford. Should lawmakers spend scarce resources on a tax break for wealthy individuals or for schools, higher education, health care and services for people who are vulnerable?

Read the full policy brief or our press release.

Corporate Tax Avoidance Adds to State Woes

6:16 am in Uncategorized by ThirdandState

A blog post by Chris Lilienthal, originally published at Third and State.

Far too many of the largest corporations have come up with ways to avoid paying taxes on billions of dollars in profits each year. A new report on state corporate tax-dodging finds that 265 of the nation’s largest corporations paid state corporate income taxes on only about a half of $1.33 trillion in profits between 2008 and 2010. That amounts to nearly $43 billion in state income tax avoidance over the three years!

The report doesn’t identify state-specific tax payments since the companies don’t disclose their profits and taxes on a state-by-state basis. It only reports total state corporate tax payments made.

Of the 265 Fortune 500 companies examined, 68 paid no state corporate income tax in at least one of the last three years and 20 averaged a tax rate of zero or less during the 2008-2010 period. Among the companies paying no net state income tax over the full three-year period were DuPont, Goodrich, International Paper, and Intel.

Of the 14 corporations headquartered in Pennsylvania that were examined in the report, H.J. Heinz, Air Products & Chemicals, and Comcast paid no state corporate income tax in at least one of the last three years. Among the Pennsylvania companies, H.J. Heinz averaged the lowest tax rate over the 2008-2010 period (at less than 1%), while PNC Financial Services Group, Airgas, and Air Products & Chemicals averaged three-year tax rates of less than 2%. On the other end of the spectrum among the Pennsylvania corporations, Universal Health Services averaged a three-year tax rate of 4.9%, while UGI and Dick’s Sporting Goods averaged three-year rates of 5.3%.

The report comes at a pivotal time. As The New York Times notes:

This year, there has been a great deal of discussion about whether corporations are paying their fair share of federal taxes. But the issue resonates at the state level as well, where corporate taxes have long been a shrinking share of state revenues. While corporate income taxes made up 9.7 percent of state revenues in 1980, according to the Nelson A. Rockefeller Institute of Government, they now make up only an estimated 5.7 percent. {See the graphic above.}

In Pennsylvania, state corporate taxes as a share of state revenues went from 11.9% in 1980 to 5.8% in 2009, according to U.S. Census data.

For the past three years, states have made recession-driven cuts to public schools, colleges, and health care for children and families. Pennsylvania has cut $860 million from public schools and reduced funding for colleges by 18%. Had all corporations paid their fair share, Pennsylvania could have avoided many of these cuts.

PA Must Reads: Tax Benefits For Corporations, Health Care and Prevailing Wage

8:49 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

Toll Bros., the Pennsylvania-based homebuilder that benefited mightily from the housing bubble, also managed to benefit handsomely from you the taxpayer. This morning, The Philadelphia Inquirer reports that company profits are down from the previous period in part because the company claimed an eye-popping $59.9 million tax benefit in the 4th quarter of last year.

You can’t open the opinion pages without coming across an article from the business lobby claiming businesses need more tax breaks. The fact is these companies got huge breaks that helped boost CEO pay but haven’t translated into robust job growth.

Toll attributed the year-over-year profit decline to write-downs on inventory and joint ventures, as well as charges related to retirement of debt.

A $59.9 million tax benefit in the year-ago quarter also had provided a big boost to the builder’s income in that period, when the pretax loss was $9.5 million.

Since we are talking about construction, Stephen Herzenberg has an op-ed in the Harrisburg Patriot News on the impact of prevailing wage laws on public construction project costs. The Keystone Research Center also released a briefing paper (PDF) on the benefits of the prevailing wage last month.

The Philadelphia Inquirer this morning discusses the bills moving in the Legislature that would limit oversight of health insurance rate increases. With many insurers facing little competition in their local markets, limiting public oversight over rate increases is giving a near monopoly permission to price gouge. Sharon Ward explains.

The Philadelphia Inquirer also has a story on the Career Support Network, a program that aims to help workers get and keep jobs by combining job training with health coaching. Health problems for obvious reasons are a key factor limiting many workers’ ability to hold down jobs.

Knowing that, Cornman-Levy jumped at the chance to link the training groups with Jefferson’s health education, screening, and treatment.

Jefferson and the centers set up a small screening protocol for people enrolled in the green-jobs program.

They found that nearly 50 percent of the students, mostly African American males, were prediabetic.

‘It was alarming,’ Cornman-Levy said, ‘but I thought, “Wow, we’re really onto something.” ‘

That test led the federation and Jefferson to receive a $425,000 grant from the Robert Wood Johnson Foundation to set up screening, peer counseling, education, and a host of services aimed at helping these unemployed workers get and keep a job.

So far, contributions have come from the Thomas Scattergood Foundation, the Independence Foundation, the Boeing Foundation, and the Job Opportunity Investment Network, a local network of philanthropic groups focused on workforce development.

The Chronicle of Higher Education reports that a survey commissioned by the Accrediting Council for Independent Colleges and Schools has found that some employers view unfavorably the job higher education overall is doing to prepare students for the workplace.

The group surveyed more than 1,000 employers in various industries last month about whether job applicants possess the skills to thrive in the workplace. More than half of employers said finding qualified applicants is difficult, and just under half thought students should receive specific workplace training rather than a more broad-based education.

I’m not sure what to make of this survey, but for those interested in the dirty details, here are some links to the results: