Pennsylvania reaps
benefits of new legislation that lets businesses keep more of their profits.
The Keystone State
may have unlocked the key to sustainable economic recovery: reducing the
overall tax bill and freeing business from the burden of over-regulation.
If that sounds
unfamiliar to observers of Pennsylvania politics, it may be time for them to
take another look, say business leaders who are watching these changes take hold
firsthand.
“The overall
business climate in Pennsylvania is very good and is continuing to get better,”
says Dan Fitzpatrick, Citizens Bank president for Pennsylvania, New Jersey and
Delaware and chairman of the Greater Philadelphia Chamber of Commerce. “There
have been a number of tax reform initiatives that have been enacted into law.
The phasing out of the capital stock and foreign franchise tax has been very
good. That tax was a disincentive for companies to build and invest in
Pennsylvania.”
Since taking
office in 2011, Gov. Tom Corbett has enacted a series of tax law changes
designed to put more capital into the hands of expanding companies. In 2011, he
signed into law a single sales factor apportionment for taxable years beginning
in 2013. The move encourages businesses to locate within the commonwealth by
weighing the tax base less on their presence in Pennsylvania and more on their
sales in the state.
Also in 2011, the
governor completed unemployment compensation debt refinancing, saving Pennsylvania
businesses an estimated $150 million over seven years and providing for the
long-term solvency of the system.
“My policy for
growing the Pennsylvania economy is simple — more jobs, less taxes,” says Gov.
Corbett. “Keeping taxes low keeps confidence high and that’s what drives
business growth. It sends a clear message that if you are an entrepreneur with
a strong business model or you are a growing business looking to expand,
Pennsylvania is where you want to be.”
One of the
governor’s earliest victories came with the passage of joint and several
liability reform in 2011. As a result, Pennsylvania is no longer one of a
handful of states where the legal system can hold a person, company or local
government agency liable for 100 percent of damages despite that entity having
only a minor role in any incident generating a lawsuit.
Other major
initiatives pushed through by Corbett include:
Passage of Act 13
— Marcellus Shale legislation — creating fairness and equality for job creators
in the energy field by providing long-term regulatory predictability.
Eliminating the
inheritance tax on small business.
Raising the cap on
corporate net income tax net operating loss deductions from $3 million or 20
percent of income to $5 million or 30 percent of income by 2015.
Creating a startup
business tax deduction after Dec. 31, 2013, that allows new businesses to
deduct up to $5,000 of startup costs from taxable income as an incentive for
entrepreneurs to create new small businesses and invest these savings into
equipment.
Phasing out the
capital stock/foreign franchise tax, reducing the rate from 2.89 mills in 2011
to zero mills in 2016.
Repealing the tax
on corporate loans, effective Jan. 1, 2014.
Passing tax
appeals reform — a move that restructures the Board of Finance and Revenue
within the Treasury Department to better address tax appeals functions.
Dan Fitzpatrick,
Citizens Bank president for Pennsylvania, New Jersey and Delaware and chairman
of the Greater Philadelphia Chamber of Commerce
On top of all
these measures, the governor overhauled the state’s permit review processes. As
a result, the Pennsylvania Department of Transportation now takes an average of
just nine days to review permit applications and the Department of
Environmental Protection now provides regulatory certainty, clarity and
consistency across the DEP’s six regional offices.
The changes have
had an immediate impact on business growth. Since January 2011, Pennsylvania
ranks second in the nation in job growth, adding more than 130,000 jobs.
“Our unemployment
rate remains the lowest it has been since the recession and businesses now want
to come here, hire our workers and grow in Pennsylvania,” Gov. Corbett adds.
“It’s a sign we are heading in the right direction and Pennsylvania’s economy
is on the rise.”
This rise is
reflected in a number of expansion projects recently announced in Pennsylvania.
In the 2012-2013 calendar year, the state recorded 259 new corporate project
engagements and 126 offers of assistance. Through the first two quarters of
2013, the state has already registered 135 new project engagements and is
seeing increased interest from expanding companies.
On Aug. 13, the
Curtiss-Wright Corp. announced that it will relocate a flow control facility
from New Jersey to Bethlehem, Pa., and invest more than $7 million to support
the move. The relocation project adds 95 jobs in Northampton County.
“We are thrilled
to be relocating our operations to the Lehigh Valley and look forward to
supplying our mission-critical products and services from our new, modern
manufacturing, testing, warehousing and office facility,” said Todd Schurra,
general manager for the global engineering and manufacturing company, which is
building a 179,000-sq.-ft. facility.
On Aug. 8, Georgia
PrintCo Northeast, a digital graphics manufacturer, announced that it will locate
operations in Luzerne County and bring 25 jobs to the region. The company plans
to purchase a 32,000-sq.-ft. facility in Pittston Township and invest more than
$2 million into renovations, site improvements, new equipment and employee
training.
Other recent deals
in Pennsylvania include Gordon Food Service’s $80-million, 166-job cold-storage
facility and distribution center in Findlay Township in Allegheny County and
ABC Home Medical Supply’s 86-employee headquarters relocation to Exton in
Chester County.
Citizens Bank’s
Fitzpatrick says projects like these are a sign of things to come in
Pennsylvania. “I believe the message is getting out about Pennsylvania’s
improved business climate,” he says. “I applaud the governor for his trips
abroad. Pennsylvania is definitely letting companies in other parts of the
country know about our valuable resources and that we are open for business.”
Chris
Masciantonio, general manager of governmental affairs for U.S. Steel in
Pittsburgh, says that “the improvements in the corporate tax structure have
been the most helpful in terms of elevating our business climate. Increasing
the cap on the net operating loss carried forward is especially helpful to
manufacturing companies like ours. And the legal reform that was signed into
law was a big improvement for Pennsylvania. All of these changes are indicative
of what the governor and the legislature are trying to do.”
U. S. Steel
completed a $500-million investment into a new coke battery at the company’s
Mon Valley Works plant (shown below) this year. The Clairton Plant C Battery
Investment Program “represents our confidence in doing business in
Pennsylvania,” says Masciantonio.
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