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Thompson Proposes Capital Stock and Franchise Tax
Cut
$18 Million Reduction Could Help Spur Economy, Job Growth
HARRISBURG -- State
Senator Robert J. Thompson, R-19th District and Chairman of the Senate
Appropriations Committee, is introducing legislation to reduce the state’s
Capital Stock and Franchise Tax as a way to promote economic growth and job
creation.
“In current fiscal year and in the last year, we
pushed back the elimination of the Capital Stock and Franchise Tax by two years
in order to balance the General Fund Budget,” Senator Thompson said. “With the
current revenue surplus in excess of $350 million and increasing, it is time to
again think about phasing this tax out. We have seen in the past that this tax
has a negative impact on economic growth and jobs.”
Reducing the Capital Stock and Franchise Tax has
been a priority issue for Senate Republicans as a way to reduce the burden
placed on businesses that limits their ability to expand and hire staff. A hike
in the rate to 13 mills in 1991 under then-Governor Robert Casey has been
suggested as one of the major reasons for the closure or relocation out of
Pennsylvania by many companies and the resulting loss of thousands of jobs. It
has also been a major impediment to the attraction of new companies.
Currently, Pennsylvania’s Capital Stock and
Franchise Tax rate is 6.99 mills. Senator Thompson’s measure would lower the
Capital Stock and Franchise Tax rate to 5.5 mills for tax year 2005 and to 4
mills for tax year 2006. Under current law, the tax rate for 2005 will be 5.99
and 4.99 mills in 2006.
“By increasing the phase out by one-half mill for
the next two calendar years, we will hasten the phase out to 2009 instead of
2010,” Senator Thompson said. “The bill would decrease the tax burden on
businesses by $18 million for the next fiscal year. This will allow for
business investment and the creation of additional jobs.”
The reduction is proposed by
Senator Thompson to be included as part of the Commonwealth’s final budget for
Fiscal Year 2004-05.
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