By Stephen Herzenberg, Diana Polson, and Marc Stier<\/p>\n
Closing Delaware loophole, instituting worldwide combined reporting would level the playing field for small businesses and generate over $700 million a year to invest in PA communities This paper focuses on\u00a0<\/span>the details of\u00a0<\/span>one part of this story<\/span>:\u00a0<\/span>the cuts in corporate taxes\u00a0<\/span>in Pennsylvania\u00a0<\/span>since 2002\u00a0<\/span>that have\u00a0<\/span>reduced revenues\u00a0<\/span>by\u00a0<\/span>what is now\u00a0<\/span>$4.2 billion per year\u00a0<\/span>and\u00a0<\/span>have\u00a0<\/span>created a tax system that is among the most unfair in the country.\u00a0<\/span>\u00a0<\/span><\/p>\n Pennsylvania\u2019s tax<\/span>–<\/span>cutting<\/span>,<\/span>\u00a0shaped by the corporate-sponsored narrative<\/span>,<\/span>\u00a0has taken a variety of forms. Under both Republican and Democratic\u00a0<\/span>g<\/span>overnors, we have\u00a0<\/span>entirely<\/span>\u00a0<\/span>eliminated<\/span>\u00a0<\/span>one\u00a0<\/span>of our two major\u00a0<\/span>tax<\/span>es\u00a0<\/span>on corporations, the Capital Stock and Franchise\u00a0<\/span>T<\/span>ax<\/span>\u00a0<\/span>(CSFT)<\/span>. We\u00a0<\/span>have\u00a0<\/span>also\u00a0<\/span>allowed businesses to lower their reported profits subject to the largest remaining corporate tax\u2014the\u00a0<\/span>Corporate Net Income\u00a0<\/span>(CNI) tax. And we have continued to give multi-state corporations free rein to cook their books and exploit corporate tax loopholes to their reported income subject to the CNI<\/span>. The\u00a0<\/span>result\u00a0<\/span>is\u00a0<\/span>that 73% of corporations that do business in Pennsylvania pay no corporate income tax<\/span>\u00a0at all<\/span>.<\/span>1<\/span>\u00a0<\/span><\/p>\n This policy brief updates estimates of the cost each year to the Pennsylvania budget from corporate tax cuts since 2002-03 and shows how this has eroded the contribution of corporate taxes to state General Fund revenues. The brief closes by proposing a solution\u00a0<\/span>that eliminates\u00a0<\/span>the\u00a0<\/span>tax loopholes\u00a0<\/span>that allow corporations to shift profits from Pennsylvania to other states<\/span>:\u00a0<\/span>combined reporting.\u00a0<\/span>Combined reporting\u00a0<\/span>has\u00a0<\/span>already\u00a0<\/span>been\u00a0<\/span>adopted by\u00a0<\/span>28 states and the District of Columbia<\/span>. W<\/span>e propose going even further\u00a0<\/span>and\u00a0<\/span>propose\u00a0<\/span>limit<\/span>ing\u00a0<\/span>corporation<\/span>s\u2019 ability<\/span>\u00a0to shift reported profits overseas\u00a0<\/span>by adopting w<\/span>orldwide combined reportin<\/span>g.<\/span>\u00a0<\/span><\/p>\n\n\t\t
\n<\/em><\/p>\n