Democrats in the Pennsylvania House on Wednesday passed a bill that would require multi-state businesses to report income in each location. The reform to the tax code aims to ensure companies can't hide income earned in Pennsylvania in other states with lower taxes.
The bill would also reduce taxes on corporate net income from 7.99% to 4.99% starting in 2031, and would end personal income tax on overtime or tips.
"We recognize we can cut corporate tax rates by broadening the base and bringing more money into the Commonwealth," Rep. Matt Bradford, D-Montgomery and Democratic majority leader, said during debate over the bill. "Pennsylvania needs to be more friendly to business."
Without bringing in more businesses, the state will continue to lose population and will struggle economically, Bradford said.
All but two Republicans voted against the bill.
Rep. Jesse Topper, R-Bedford and the Republican House leader, said if the Democrats put the proposals to end tip and overtime taxes in a stand-alone bill, it would likely get unanimous support. But the combined tax reporting requirement is a "poison pill" that would add a tax increase that could be as high as a billion dollars on multi-state businesses, he said.
"Combined reporting is no way to balance a budget," Topper said. "If we are reforming our tax structure, it must come with cutting taxes, not adding new ones that must be paid."
Rep. Marla Brown, R-Lawrence, said on the House floor that the consequences would be severe for business and that is an untested strategy. A similar law is already in place in 28 other states, including states like Texas which are both Republican-controlled and business-friendly states.
If that happened, it would be shown in the combined tax reports, Bradford said just before the bill was put to a vote.
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