Gov. Tom Wolf’s announcement that one of Pennsylvania’s reviled business taxes died at the end of 2015 is overshadowed by the uncertainty that persists over the state’s budget and tax plans.
The 171-year-old capital stock and franchise tax had been assessed against businesses based on what the Greater Pittsburgh Chamber of Commerce characterized as “how much a particular business is determined to be theoretically worth in a given year,” on top of any corporate net income taxes the firm might pay. Its phase-out was started in 2000 by former Gov. Tom Ridge, with an expected expiration date of 2008. Tight budgets since then have led governors and lawmakers to delay the end, until now.
The elimination of the tax undoubtedly is good news for business — and, if the tax’s critics are right, Pennsylvania’s competitive position among other states — but its demise deepens by $240 million the hole that must be filled in the state’s 2015-16 General Fund.
That’s how much the tax raised in fiscal 2014-15, so its end is problematic at a time when Mr. Wolf is demanding at least $350 million more for education than the Republican-controlled Legislature has agreed to provide and is insisting that the $30.26 billion budget that reached his desk was vastly underfunded.
Mr. Wolf’s line-item veto cut out almost $7 billion, restarting the flow of cash to state agencies, school districts, social service organizations and more. That leaves it far from complete because it includes just over six months of school funding and big holes in the allocations for colleges and universities, state prisons and programs that provide assistance for the state’s poorest people.
Also left undone is an accompanying state tax code — legislation that sets the tax rates for the year and, thus, pays for government operations. While taxes are being collected today based on the level set in the 2014-15 budget, just how much residents and businesses will pay going forward in income, sales, cigarette or other taxes — and now with the loss of $240 million from the capital stock tax — has not yet been decided.
The $23.39 billion partial measure that was enacted did not resolve the state’s most challenging financial questions. Pennsylvanians are tired of waiting for the answers.
First Published: January 6, 2016, 5:00 a.m.