State’s new Senate majority leader sees CNIT, energy resources driving economic growth

Accelerating Pennsylvania’s corporate net income tax (CNIT) reduction and responsibly using the state’s energy resources will stimulate and grow the Commonwealth’s economy, says new State Senate Majority Leader Joe Pittman (R-41).

“Throughout my tenure in the Senate, and particularly as it relates to the [41st senatorial] district that I represent, energy policy is a focus,” Pittman said during a Dec. 5 interview with Pennsylvania Business Report.

“I think our Commonwealth has been very blessed with the energy resources that we have and using those resources in a responsible way to develop economic growth, to me, is the core of everything we should be focused on,” said Pittman, who also serves as vice chairman of the Pennsylvania Senate Environmental Resources and Energy Committee. “At the end of day, economic growth and creating wealth and opportunity is really at the root of solving all of our problems as a state.”

To reach that goal, Pittman said it begins with responsibly using Pennsylvania’s energy resources and making sure investment and development are welcomed in a responsible way, such as by quickly reducing the CNIT rate.

“I think the reduction in the [CNIT] — and also we have to keep in mind the like-kind exchanges, which is a benefit to smaller employers in particular — was a significant development and it was done in a bipartisan way,” said Pittman. “And I think it sets the stage for us to be a true competitor among states when it comes to attractiveness for investment.”

Reducing Pennsylvania’s 9.99 percent CNIT rate has been proposed by policymakers from both parties in Harrisburg for the last decade. This year, Democrats and Republicans finally agreed on an approach that will cut what has been the nation’s second-highest state corporate tax rate with enactment of House Bill 1342 as part of the 2022-2023 state budget.

Beginning Jan. 1, 2023, the state’s CNIT rate will decrease one percentage point to 8.99 percent, and each year thereafter will drop another 0.5 percentage points until it reaches 4.99 percent by the start of 2031.

Additionally, the law includes a provision that will increase the amount of capital investment pass-through business that owners can deduct on their individual income tax returns the year the investments were made, according to the Tax Foundation, an independent tax policy nonprofit.
In the long run, Pittman thinks the CNIT rate reduction will be a transformational change to the state’s tax policy that will bring along some pretty significant benefits.

“The key for us is that this is a multi-year phase down, and first and foremost we must remain true to the commitment of scheduling to phase it down,” the state lawmaker said. “But hopefully, if economics allow and our revenues continue to be robust, we could even look at accelerating that draw down of the tax rate to further incentivize growth.”

And while there hasn’t been any formal talk of accelerating the phase-in of the CNIT rate, Pittman said he thinks all state lawmakers, under the right fiscal times, would like to accelerate it.

“Obviously the sooner we bring down that number the quicker we become more attractive to the investment,” he said.

Speaking of “the right fiscal times,” Pittman circled back to energy resources in Pennsylvania, noting that energy independence unlocks a lot of potential for the state and for the nation.

“I have to say, whenever you see what’s occurring in Europe right now, and the thuggery that we see coming out of Russia, it amazes me that that has not heightened the awareness of the United States whenever it comes to the need for energy independence,” he said. “Because, candidly, Europe is on the verge of being brought to their knees because they bought into Russia’s thuggery for their energy, instead of focusing on their energy independence and that’s a dangerous path to go down.”

Pittman remains hopeful that Governor-elect Josh Shapiro will take a new fresh look at energy policy in the Commonwealth.

“Our current governor has been feckless whenever it comes to working with the legislature. He has demonstrated no ability, in my opinion, to actually sit down at the table and drive a meaningful energy policy,” Pittman said.

In comparison, he said that Shapiro served in the State House of Representatives, “and I think he understands the broader value of energy and regardless of his partisan affiliation, I’m optimistic that he’s going to understand that we need to have a reasonable all-of-the-above energy strategy and that the legislature is going to be a partner in this process. I’m eager to try to find areas of agreement that we will have hopefully.”

Common ground can be found, Pittman said, as long as Shapiro recognizes that going down the path of the Regional Greenhouse Gas Initiative (RGGI) is not going to allow Pennsylvania to come to that broader conversation.

Pittman has staunchly opposed the carbon tax under the governor’s proposal that Pennsylvania join the RGGI, saying it would severely impact the region’s coal and electric generation sectors and potentially cause the loss of thousands of good paying, family-sustaining jobs.

Shapiro has said he plans to convene a working group to bring together people from all sides of the issue to find consensus on policy that would address climate change but not raise energy prices or put anyone out of work. And he has not committed to joining or staying in the RGGI.