Report offers suggestions to improve Pennsylvania’s tax code, economic competitiveness

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The Pennsylvania Chamber of Business and Industry introduced Wednesday a new study, which found that the Commonwealth’s tax code is a barrier to economic competitiveness.

The report compares Pennsylvania’s tax structure to those of other states and offers several policy options aimed at improving the state’s competitiveness.

The Tax Foundation authored the study, titled “Pennsylvania: A 21st Century Tax Code for the Commonwealth.” A grant from the PA Chamber funded the study.

“Pennsylvania’s tax structure leaves a lot to be desired,” PA Chamber Vice President of Government Affairs Sam Denisco said. “For too long, our state’s uncompetitive tax structure has caused the Commonwealth to lag behind other states – missing out on economic opportunity and growth. In order to compete in today’s global economy, we need to take a page out of the federal government’s book and take a hard look at the shortcomings within the state’s Tax Code.”

The report found that Pennsylvania relies more heavily on corporate taxes for revenue than most other states. The corporate income tax represents 4.7 percent of Pennsylvania’s state and local tax collections while the national average is 3.7 percent, according to the U.S. Census Bureau. Pennsylvania’s corporate net income tax rate is the highest in the nation at 9.99 percent.

The Tax Foundation ranked Pennsylvania fourth in terms of corporate income tax collections and ranked its corporate income tax structure the seventh worst in the nation.

The report’s authors offered three different reform proposals of varying degrees of aggressiveness that aim to simplify and improve the tax code and increase the state’s competitiveness.

“We’re in a competitive moment, where states are responding to changing incentives under federal tax reform and working to make their tax codes more reflective of today’s economy,” Tax Foundation Senior Policy Analyst Jared Walczak said. “There’s a real opportunity to build a tax system for a diversified economy and to position the Commonwealth as a destination for investment, entrepreneurs, and talented individuals in the years ahead.”