HARRISBURG — A bicameral group of GOP lawmakers on Tuesday pitched a set of tax reforms intended to ease Pennsylvania's regulatory burdens on small businesses while giving owners more incentives to expand.
"The reforms we are announcing today would replace several unnecessarily complicated tax obstacles with fairness and simplicity, so our small businesses can focus on growing the jobs our citizens need," said state Rep. Stephen Bloom, R-199, joined by a few local small business owners at a press conference in the state Capitol.
Bloom, fellow legislators and industry representatives used Tax Day to highlight three bills they say would "simplify the state's tax code," in part by making changes so Pennsylvania's rules more closely mirror federal tax laws.
“If taxes are simplified, there is less paperwork and the need for tax experts is reduced, that will allow small business owners to focus instead on growing their companies” said Kevin Shivers, executive state director for the National Federation of Independent Business, which helped organize the press event. “That’s good for the Pennsylvania economy and ultimately for job growth.”
Gov. Tom Corbett — whose re-election campaign focuses on "no new taxes" — has long advocated for "reducing the tax burdens on job creators," Corbett spokesman Jay Pagni said. Corbett has already addressed some of the tax-related issues raised Tuesday, Pagni noted, and the governor has previously supported the concept behind at least one of the three proposed reforms, the bill to allow for "like-kind exchanges."
"The governor believes that there is some room for further improvement to make Pennsylvania’s tax climate more attractive," Pagni said, "but he would need to have those discussions and look at making changes if they would be in the best interest of Pennsylvania."
Here's a look into the three tax reform-related bills spotlighted on Tuesday:
Large expense deductions
Rostick "Ross" Pilip, president and owner of Trust Ambulance Inc. in Camp Hill, is most excited about the proposal he says will free up cash for businesses making major investments.
Under current law, Pennsylvania businesses can deduct up to $25,000 from the cost of expensive investments, based on the lifespan of the purchase.
Proposed legislation would allow for "accelerated depreciation" in the first year of a large purchase, enabling companies to deduct more of the cost immediately rather than spacing it out over several years. The overall amount paid to the state would remain the same. The bill, sponsored by Westmoreland County Rep. George Dunbar and Venango County Sen. Scott Hutchinson, would raise the deduction cap to $100,000 a year.
Such a change is likely to spur Pilip to replace his ambulance transport company's aging medical equipment more rapidly.
“That would benefit us a whole lot, from us being able to purchase new medical equipment and ambulances so that we could better aid the community,” said Pilip, 27, who grew up in Langhorne, Bucks County. “That would open up the doors for us to write that off as an expense versus keeping it for four or five years. Based off the tax credit, we would receive the ability to expand our services and offer better quality of service.”
Alignment with federal law
Shaun Foote, president of Foote Capital Mortgage Company in Carlisle, said that inconsistencies between state and federal tax laws lead to piles of extra paperwork for small businesses.
"I got in this business to help people finance their dream homes, and more and more I’m finding myself bogged down with just completing government agency forms, and it's a lot of repetitive information over and over,” said Foote, 34, who also owns The Carlisle Vault banquet venue. "A friction-less business environment certainly helps grow the economy, and helping align some of these state tax rules with the federal government certainly helps remove some of the friction."
A proposal by York County Rep. Seth Grove and Lancaster County Sen. Mike Brubaker would bring Pennsylvania in line with the federal government when it comes to rules regarding "net operating loss."
Under the federal tax code, small businesses can offset their losses against other earnings. A company could sell off a large piece of machinery, for instance, and count the money from that sale as income to help offset its losses.
Existing Pennsylvania law does not allow for such calculations, requiring owners to fill out two sets of forms with different rules and requirements, the NFIB says.
'Like-kind exchanges'
Finally, a tax reform proposal by Bloom would allow for "like-kind exchanges," which would enable companies to sell equipment or property, and then immediately purchase similar upgraded equipment or property without getting hit with a tax penalty. A certified intermediary would have to oversee the transactions.
"That would be certainly something that is important to a business owner, particularly those trying to expand their business," Foote said.
The NFIB pointed out that the federal government and every other state already allow these types of penalty-free exchanges of real estate and business assets.
Lebanon County Sen. Mike Folmer is also a prime sponsor of like-kind exchange legislation. Corbett called for like-kind exchange allowances in his 2013-14 budget address.
It was not immediately clear how the proposed tax code changes would affect Pennsylvania's revenues, with Bloom describing the financial cost to the state as "nominal."
