Pennsylvania – “Open for Business” or “Open to Tax”
July 25, 2022
Governor Wolf and other Pennsylvania lawmakers recently passed the state budget for FY22-23 (the “Budget”). Coming in at $45.2 billion, the negotiations entailed to finalize the Budget appear to be worth the effort by having the best of both worlds- increased revenue placing Pennsylvania in a strong fiscal position without having to increase any taxes.
In fact, as part of the Budget’s tax policy, Pennsylvania is lowering its corporate net income tax (“CNIT”) rate from 9.99% to 8.99% for the 2023 tax year. From there, the CNIT rate will continue to decrease by 0.5% each year until the CNIT reaches a baseline 4.99% rate in 2031.
This phased reduction is a change welcomed by both sides of the aisle, with the hope that Pennsylvania will become more attractive for businesses. Comparatively, the current 9.99% CNIT is one of the highest in the country. Set against Pennsylvania’s neighboring states- except for Ohio since it has no corporate income tax- New York, New Jersey, and Maryland, have current corporate tax rates of 7.25%, 11.5% and 8.25%, respectively. It stands to reason that the 4.99% rate by 2031 has the potential to incentivize more commercial activity in Pennsylvania.