Legislators move to close tax loophole

Senate Democratic leaders are putting forward a plan they say would lower Pennsylvania’s business taxes by closing a decades-old loophole.

Senate Democratic leaders are putting forward a plan they say would lower Pennsylvania’s business taxes by closing a decades-old loophole.

Listen:
[audio: 090603sdloop.mp3]

Senate Minority Leader Bob Mellow, a Lackawanna County Democrat, says a loophole in Pennsylvania’s tax structure allows corporations doing a majority of their business in the commonwealth to report net income taxes out of state.

Mellow: So what happens? Corporations go ahead and form major subsidiaries in the state of Delaware. Multiple state corporations. They form subsidiaries in Delaware, they do a lot of their business in Pennsylvania, but yet the business is charged to an intangible asset in Delaware. Delaware doesn’t tax intangible assets.

Mellow says closing the so-called Delaware Loophole would bring in around 700 million dollars over the next two years.

He says lawmakers could use that savings to cut Pennsylvania’s corporate net income tax, which is just under ten percent right now.

Mellow and other Democrats want to lower that rate to 7.99 percent by 2014. He says he’s optimistic Republicans will be open to debate on the issue.