Momentum Builds for Delaying Corporate Tax Cut

Senator Jake CormanMomentum is building in Harrisburg to delay a tax cut for profitable corporations next year in order to restore funding to public schools and other priorities in the 2013-14 budget.

Senator Jake Corman, a Republican who chairs the chamber's Appropriations Committee, is the latest lawmaker to say he would consider freezing the capital stock and franchise tax at the 2012 rate, which would raise $360 million.

Pennsylvania began phasing out this tax in the late 1990s, although the tax cut has been delayed in five of the last 15 years because the commonwealth could not afford it. The tax has been cut by 85% already and is on track to be fully eliminated next year unless lawmakers act.

Senator Corman was quoted in a Philadelphia Inquirer article today saying a delay in this tax cut should be on the table:

"Whether we do it or not remains to be seen," said Corman, who said he would consider rolling the tax back to 2012 levels. "Is that phaseout more important than education dollars? Higher education dollars? . . . Economic development dollars? That's what you are weighing."

WITF also quoted Senator Corman responding to business lobbyists opposed to the idea:

"I don't think businesses will look at it and say, 'Oh, we can't come to Pennsylvania. Oh, we're leaving Pennsylvania.' I mean, it's such a low rate now, it's fairly insignificant to them," said Corman. "Is that phase-out more important than education dollars?"

Capitolwire also quoted (paywall) Budget Secretary Charles Zogby saying the administration would be open to freezing the tax at the lower 2013 rate, which would raise about $80 million for 2013-14.

House Majority Leader Mike Turzai has said he opposes delaying the tax cut, but Capitolwire quotes a House GOP source saying it is likely to happen:

But after his remarks were published, a senior House GOP staffer responded: "Some adjustment to the CSFT is probably a given when you consider the revenue that is needed in order to pass a budget that will be structurally sound in fiscal year 2014-2015."

All of this comes as Philadelphia city and school district officials have been meeting with state officials to hash out a plan to reduce a $304 million funding shortfall for city schools and avert a worst-case-scenario plan to lay off nearly 3,800 teachers and staff and to shutter 23 schools.

Philadelphia is not alone. The Allentown School District announced last week the planned elimination of 132 positions, including the layoff of 99 teachers. A recent survey of school districts found that a third year of school cuts will reduce course offerings, increase class sizes, reduce extra-curricular and athletic programs, and close school buildings across the state.

The clock is ticking for students in Philadelphia, Allentown, and many other school districts across Pennsylvania. Delaying unaffordable tax cuts is the fiscally responsible thing to do and must be a part of any effort to get our schools back on track.

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