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Biz coalition warns of serious implications of combined reporting
Chamber continues to counter administration's misleading rhetoric with facts The PA Chamber, along with other members of the CompetePA Coalition, is telling lawmakers that the No. 1 priority for the 2010-11 state budget should be creating an environment in which businesses can create jobs. As such, the coalition is urging them to reject Gov. Ed Rendell’s proposals for new taxes, including the call to implement combined reporting. Combined reporting treats affiliated taxpayers (parents and subsidiaries) engaged in a unitary business as a single entity for the purpose of determining taxable income. Proponents say it is necessary in order to close so-called “tax loopholes” – an increasingly popular term used by supporters to negatively characterize legitimate and legal tax planning policies with regard to some corporations’ use of passive investment (Delaware holding) companies in other states. “Combined reporting is not going to be the great equalizer among taxpayers that the Rendell administration would have you believe,” PA Chamber Vice President Gene Barr said, noting that the complex tax reporting system merely creates winners and losers within the tax system. Some industries might see their tax burden lowered under combined reporting, while other businesses and industries would pay significantly higher taxes. In addition, t here is no statistical evidence that states enforcing combined reporting collect more tax revenues than states that employ separate accounting, given the other characteristics of the tax structure and the state’s economy. The coalition is also addressing the governor’s repeated claims that “71 percent of businesses in Pennsylvania don’t pay taxes,” and that “most corporations don’t pay any taxes because they use the Delaware holding” provision contained in state tax law. Both statements are disingenuous. “There are obvious and legitimate reasons why some companies subject to the Corporate Net Income tax don’t pay,” Barr said. The 71 percent referenced by the governor includes C-corporations that have no tax liability because they lost money or are inactive corporations. Moreover, most companies that would see a tax increase under combined reporting don’t have a passive investment company, and the Revenue Department already has the enforcement powers to counter illegal abuses of Delaware holding companies. To those who imply Pennsylvania businesses are getting a free ride: that couldn’t be further from the truth. Businesses pay sales, property, gross receipts and unemployment compensation taxes, among others – not to mention regulatory costs, government mandates and fees. In fact, Pennsylvania’s employers already pay $23 billion in state and local taxes, in addition to innumerable state fees. Taxes paid by employers represent about 42 percent of all state and local taxes collected in the Commonwealth. Meaningful discourse about what’s need to move the Commonwealth forward can’t be achieved without honest facts and, unfortunately, that’s what’s missing on one side of the combined reporting debate. That’s why the PA Chamber has been taking both proactive and reactive steps independently and in conjunction with other organizations to refute misleading and dishonest statements made by the administration. The PA Chamber recently had letters to the editor published in both the Scranton Times-Tribune and the Philadelphia Inquirer to repeat the message that the governor’s tax proposals will take more money away from families and capital away from businesses at a time when neither can afford it. ### Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state’s largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business. |
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