Three New Tax Breaks Will Cost PA Schools and Services

After making deep cuts to schools, early childhood education, and health and human services, Pennsylvania lawmakers are now considering new tax breaks that will largely benefit a small number of higher-income earners.

Last week, the Senate Finance Committee approved legislation that would create a new loophole in the state inheritance tax. It allows business owners to bequeath business assets tax-free to their heirs — an advantage unavailable to most hardworking Pennsylvanians who inherit a family home or car.

Over in the House, the Finance Committee voted 18-16 on Wednesday to approve a bill that would exempt sales tax on the purchase of private and corporate aircraft, jet parts, and aircraft maintenance and repair. A car or truck purchase will still be subject to sales tax, but those in the market for a private jet will get a tax break. 

Finally, the House Commerce Committee is voting today on legislation that would reward investors in Pennsylvania start-up companies with a new tax credit that they can take even if they owe no state taxes. To qualify for the credit, the investor must have a net worth of $1 million or income above $200,000 a year.

Each bill, estimated to cost millions annually, could come up for votes before the House and Senate in the coming weeks. The Pennsylvania Budget and Policy Center has more on all three bills here.

These bills come on top of Governor Corbett's proposal to enact a new round of tax cuts beginning in 2015 that will ultimately cost hundreds of millions from the state treasury and put profitable corporations first in line when future budgets are negotiated. It would be the latest in a series of costly special tax breaks over the decade that have undermined Pennsylvania’s ability to invest in schools and other vital services.

Pennsylvania can continue to fund special tax breaks like these or we can invest again in our children and our economic future — but increasingly we can’t do both. Unaccountable tax cuts undermine success in the classroom and growth in our communities, and they shift costs onto school districts, local governments, and property taxpayers.

Pennsylvania needs real tax reform that closes loopholes, ends special tax breaks, and levels the playing field for everyone. Only then can we enact a state budget that returns to tried-and-true investments in education and the services that promote long-term economic growth.

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