A blistering new ad (above) from the campaign of Republican Gov. Tom Corbett claims his Democratic rival Tom Wolf proposed a bunch of tax increases and is dodging Pennsylvania taxes through the “Delaware loophole.”
Is it true? Let’s look at the record:
The new taxes and tax hikes mentioned in the ad (a tax on garbage, for heavens sake!) refer to Wolf’s days as state revenue secretary, when he testified in legislative hearings for tax proposals that then-Gov. Ed Rendell proposed. It’s accurate to say Wolf advocated them. But he wasn’t the policymaker either. You can decide how relevant those events are.
None of the taxes was enacted by the way. “Rendell proposed all of those levies in the 2007-08 budget year, but he abandoned them in the annual give-and-take with the Legislature,” the Wolf campaign said in an email.
The real zinger is at the end of the Corbett ad, when a woman says, “thanks to Wolf, one person got lower taxes — Tom Wolf. Wolf’s company moved to Delaware to avoid paying the same taxes he’d force us to pay. If there was a hypocrite tax, Tom Wolf would owe a lot of money.”
The reference here is to the “Delaware loophole” that allows Pennsylvania firms to register subsidiaries in Delaware to evade state corporate taxes. It’s true that Wolf’s company is chartered in Delaware, and Wolf says that was done for corporate governance purposes.
Wolf has consistently said the company derives no tax advantage from its Delaware charter. Katie McGinty, who chairs a coordinated campaign for Wolf, told me the firm “is headquartered in Pennsylvania. It pays Pennsylvania taxes. It does business in some 28 states and is set up to pay taxes in every one of those states as well.”
I have no way at the moment to independently confirm that the Wolf organization doesn’t get tax advantages from a Delaware registration, but my dim understanding of the Delaware loophole tells me a company doesn’t get it by simply registering in Delaware.
As explained here, firms playing the loophole game establish holding companies in Delaware, which then charge their Pennsylvania company for the use of a trademark or some intellectual services.
The Corbett campaign hasn’t offered any evidence that Wolf gets a tax advantage. Maybe we’ll see more on this later.
I spoke with Patti Spencer, a tax lawyer who gets this stuff, and she said the fact that a company registers in Delaware doesn’t mean it’s getting a tax break.
“That doesn’t mean anything,” she said, noting that plenty of companies register because they like the state’s corporate governance laws.
Spencer said that short of looking at the Wolf company’s corporate tax returns, there’s no way to tell whether they’re getting a tax break from their Delaware presence. I asked the Wolf campaign about that, and spokesman Jeffrey Sheridan emailed this response: “Tom Wolf has been open and transparent throughout this race releasing thousands of pages of personal financial information. The Wolf Organization has also released detailed financial information, but they are a private company and will not be making any further information available.”
UPDATE: After I published this response Saturday, the Corbett campaign said in an email to me and in a press release that in response to a question I posed in a February debate, Wolf had promised release his company tax returns.
At that debate at WHYY, I noted that the story of Wolf’s family business was central to his campaign, and asked if he would release “tax returns or other documentation that would independently confirm” his claims about the firm. Wolf answered “yes” and later added, “I’ll be happy to share what anybody wants to see.”
I don’t think he ever directly said he’d provide corporate tax returns, but his answer seemed to cover that territory. You can watch the exchange here. My question begins at 8:55 in the clip.
Finally, the Corbett ad charges that Wolf “says as governor, he’d raise the income tax on many workers.”
That’s a highly selective interpretation of a proposal Wolf has made to make the state’s income tax, now a flat rate, more progressive by exempting some low-income wage earners. While it’s true that to get the same revenue (or more, if he needs more), higher-income taxpayers would pay more. The proposal would obviously lower taxes for some.