Senate Republicans Unveil Tax Stimulus Package

Would Provide $96 Million in Relief for FY 2008-09, $246 Million by 2010-11

(HARRISBURG) – The Senate Republican Caucus today unveiled a sweeping stimulus package that would provide nearly $96 million in tax relief in the upcoming fiscal year for lower-income working Pennsylvanians, small businesses looking to expand, as well as major employers and job creators.

The four-bill Senate Republican Tax Stimulus Package was presented today during a press conference in the State Capitol Media Center. hosted by Senator Pat Browne (R-16 and Chairman of the Senate Finance Committee), which has oversight powers over state tax matters.

“The package we are unveiling today is the result of intensive study and review of a number of proposals with the goal of finding the optimum combination to provide tax relief where it is most needed and best be able to stimulate Pennsylvania’s economy,” Senator Browne said. “I plan to bring these proposals to the Finance Committee as soon as possible, since these measures must be included as part of the General Assembly’s consideration of Pennsylvania’s 2008-09 budget.”

Senate Bill 1385, sponsored by Senator Jake Corman (R-34), would expand the cap on the Net Operating Loss provision of the Corporate Net Income Tax to $5 million or 20 percent of taxable income. The NOL cap is currently set at $3 million or 12.5 percent of taxable income. If enacted, the effective date of the increase would be January 1, 2009.

The NOL expansion is projected to save Pennsylvania employers $21.5 million in Fiscal Year 2008-09, $68.4 million in Fiscal Year 2009-10, and $78.2 million in Fiscal Year 2010-11.

“One of the best ways for Pennsylvania to act to spur the state’s economy is to ease the financial burden shouldered by our employers and job creators,” Senator Corman said. “Increasing the NOL cap would provide a real incentive for business expansion and development, which in turn should provide more security for existing jobs and make it more attractive for employers to add new positions.”

Senate Bill 1386, sponsored by Senator Bob Regola (R-39), would increase the eligibility limits for special tax forgiveness for low-income Pennsylvanians. The bill would increase claimant income eligibility limits by a total of $2,000 over three years and the dependent allowance by $500 over the same period.

Currently, a family of four with a combined income of less than $32,000 pays no state income tax. Under SB 1386, families earning $37,000 or less would be exempt. That increase is projected to provide $74.6 million annually in savings to low-income working Pennsylvanians.

“There has not been an increase in the base amount since 1998 and the dependent allowance has not been increased since 2003, the same year that Governor Rendell imposed his 10 percent personal income tax increase,” Senator Regola said. “With rising energy and food costs, lower-income working families are struggling to make ends meet. Raising the ceiling on tax forgiveness would provide true tax relief to those Pennsylvanians who need it the most.”

Senate Bill 1387, sponsored by Senator Pat Vance (R-31), would double the amount that small businesses may deduct as Section 179 expenses on their income tax filings. Section 179 of the federal Internal Revenue Code provides for the deduction of all or part of the costs of machinery and equipment used for business purposes.

SB 1387 would increase the maximum annual deduction to $50,000, which is projected to provide $6.6 million in savings to Pennsylvania’s small businesses.

“This will provide relief to those small businesses looking to make substantial investments in equipment and machinery by providing for an increased tax deduction,” Senator Vance said. “That deduction may very well make a difference in whether a company will expand its operations. Those purchases help employers modernize and upgrade their facilities, while providing a boost to the suppliers of the equipment as well.”

Senate Bill 1388, sponsored by Senator John Eichelberger (R-30), would amend Pennsylvania’s Corporate Net Income Tax to expand the sales factor to 85 percent. Most corporations that conduct business in more than one state are required to use a three-factor apportionment in order to apportion their business income among the states where they have activity.

The three-factor apportionment formula consists of property, payroll and sales factors. As things stand, Pennsylvania companies continue to be penalized by increased taxes when they hire new employees or make capital investments in the Commonwealth. Currently, the sales factor accounts for 70 percent of the apportionment formula, and the property and payroll factors each account for 15 percent.

“Increasing the weight of the sales factor would help Pennsylvania companies that are based here and employ our citizens as opposed to those companies that just sell their products here,” Senator Eichelberger said. “This change will help to stimulate manufacturing jobs in Pennsylvania and benefit companies who make their products in Pennsylvania.”

Don Houser
Phone: 717 787-1377