An unfair loophole


My hat is off to Megan DeSmedt for her June 16 Perspectives piece ("Make Them Pay: Big Companies Are Slipping Through Pennsylvania Tax Loopholes"). She clearly expressed how many large companies avoid paying nearly $600 million in state income tax by setting up shell companies in other states, namely Delaware.

Combined reporting would require these companies to pay tax on the profits they make in Pennsylvania instead of allowing them to funnel their profits to tax-free states. There are 27 other states that have enacted combined reporting legislation including our neighboring states of New York and West Virginia. California closed the loophole in 1937.

About 71 percent of all Pennsylvania corporations pay no state income tax and 14 percent pay less than $1,000 per year. In 2006 a family with an income of $36,000 paid more income taxes than 84 percent of all Pennsylvania registered "C" corporations. The existing tax structure is patently unfair to working families.

Pennsylvania does have the second-highest corporate net income tax in the nation at 9.9 percent. But that's because hardly any corporations pay it. For the past six years I have introduced legislation to close this loophole and enact combined reporting, which could lower corporate taxes and still provide revenue to fund libraries, parks, transportation and other necessary state services.

My legislation, HB 1775, would level the playing field of corporate taxes, make the system fair for all and provide needed revenue.

The writer, a Democrat representing the 39th Legislative District, is chairman of the state House Finance Committee.

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