FOR IMMEDIATE RELEASE
State Rep. Phyllis Mundy
Mundy votes against costly Republican bill
that fails to close corporate tax loopholes
HARRISBURG, May 2 – State Rep. Phyllis Mundy voted against a $3.3 billion corporate-tax-cut bill that passed the state House today, noting that it would result in devastating budget cuts and fails to make big corporations pay their fair share of taxes in Pennsylvania.
"Giving large-multi-state companies a massive, multi-billion-dollar tax break and allowing them to continue to use accounting schemes to avoid paying their fair share of taxes is the definition of corporate welfare,” Mundy said. "This bill couldn’t come at a worse time – when we’re experiencing historic cuts to public education and health and human service programs, and when Pennsylvania homeowners are struggling with rising property taxes.
"Where are the tax cuts for seniors? Where are the tax cuts for workers and middle-class families?" Mundy asked. "This bill puts corporate interests ahead of those of our citizens."
H.B. 2150 passed the House despite reservations by Gov. Tom Corbett and Revenue Secretary Dan Meuser. Meuser said the “timing is not right” for the bill and noted that the governor has "concerns" about its fiscal impact to the state.
Mundy, the Democratic chairman of the House Finance Committee, echoed those concerns, noting that the bill would cost Pennsylvania taxpayers an estimated $3.3 billion in lost corporate tax revenue over the next eight years. She offered amendments to fix the flawed bill by doing what the bill does not – close the infamous "Delaware Loophole."
The Delaware Loophole is a tax-avoidance scheme in which multistate corporations avoid paying Pennsylvania's Corporate Net Income Tax by setting up shell companies in Delaware and certain other states to hold copyrights, patents and trademarks. Multistate corporations that do business in Pennsylvania pay the shell company to use the copyrights, patents and trademarks, reducing its taxable income here.
Companies often use Delaware because it does not tax royalty income. Other states, such as Nevada and Wyoming, do not have a corporate income tax
Mundy offered an amendment that would require combined tax reporting for corporations to calculate state business taxes. It’s a method of tax reporting that has been adopted by 23 other states and is widely considered the best and most comprehensive approach to ensure that all corporations their fair share of taxes. Her amendment was defeated largely on a party-line vote.
The bill also would permit companies to deduct expenses for trademarks, copyrights and patents by simply claiming it is for a legitimate business purpose. It puts the burden of proof on the Pennsylvania Department of Revenue to prove they are not valid, and presumes any of these transactions done at market prices is legitimate.
Mundy offered amendments to fix those two problems, but they also were defeated on party line votes.
Beyond the bill’s failure to close corporate loopholes, it also provides multiple corporate tax cuts. Mundy said the House Democrats tried to offer amendments to the bill that would have eliminated property taxes for Pennsylvania homeowners but Republicans used a procedural maneuver to block those amendments from being considered.
The end result, Mundy said, is a bad bill for Pennsylvania taxpayers.
"This bill gives corporations new ways to avoid paying their fair share, while also giving them a massive tax cut," Mundy said. "And, worst of all, it would place an even greater tax burden on everyday hard-working citizens who will be left holding the bag."
The bill now goes to the state Senate for consideration.