Rendell: New Study Shows Pennsylvania’s Tax Climate is Competitive, Improving

Governor’s News Release

Harrisburg – Governor Edward G. Rendell today pointed to a new, nonpartisan ranking of states showing that Pennsylvania’s tax climate is competitive and improving.

The Tax Foundation’s 2011 State Business Tax Climate Index ranked Pennsylvania 26th among states for its overall tax burden, an improvement over its 30th-place ranking in 2007.

But the rankings alone don’t tell the whole story, Governor Rendell noted.

“Pennsylvania has been a leader in reducing business taxes during my administration. In the past 8 years, businesses have saved a grand total of $7.2 billion,” Governor Rendell said. “The Tax Foundation found that Pennsylvania’s business tax climate outranks five of our six neighboring states – New York, New Jersey, Maryland, Ohio and West Virginia – all of whom were ranked among the foundation’s 10 worst states for business taxes.”

The Governor also noted that the foundation’s business tax rankings are based on Pennsylvania’s statutory corporate tax rate of 9.99 percent. In reality, very few businesses pay taxes at that rate. Of those businesses that do, the vast majority pay less than $10,000 in taxes per year, he said.

“I am an advocate of a fair and rationale tax system that promotes investment in capital and jobs. That’s why I am proud of what we have done to cut the capital stock and franchise tax rate and the lifting of the cap on net operating losses and the establishment of the Research and Development Tax Credit, which now offsets $40 million in private sector investments,” Governor Rendell said. “These are the tax changes that encourage more investment and I am pleased we shifted to single sales factor and away from a tax structure that takes the size of a company’s payroll into account.

“Taxes that are well structured and are paid by everyone lower the tax burden on every payer. That’s also why I am fighting so hard to get the natural gas extraction tax in place. If we fail to do so, individual taxpayers and businesses may see a spike in their tax rates to pay for the costs that the drilling industry is imposing on our communities,” the Governor said.

The foundation ranked Pennsylvania 14th in the nation in personal income taxes because of our state’s comparatively low, flat tax rate. When the 12 states that
have no personal income taxes are factored out, Pennsylvania actually has the nation’s second-lowest personal income tax rate.

The Tax Foundation’s study is available online at www.taxfoundation.org.