Tax Foundation Analysis of Rendell’s Tax Proposals

Joe Henchman of the Tax Foundation has put together a Fical Fact looking at Gov. Rendell’s tax increases in the proposed Pennsylvania state budget. Here is the quick overview:

The budget includes significant tax proposals.

• Broaden the state sales tax and lowering the rate from 6% to 4%. The change would eliminate many unjustified exemptions but would double-tax some retail items by taxing business-to-business transactions. The largest unjustified exemptions (most groceries, clothing, legal and medical services) would remain. The change would be a net revenue increase despite the rate reduction.
• Eliminate sales tax vendor compensation.
• Reduce the corporate income tax rate from 9.99% to 8.99%, eliminate the cap on net operating loss carry-forwards, but impose combined reporting and single-sales factor apportionment. The net result of this package of positive and negative reforms would be an increase in business tax burdens, particularly for out-of-state businesses.
• Impose a new severance tax on natural gas extraction.
• Seek federal aid by increasing unemployment benefits and exploit the federal Medicaid matching fund system.

Click here for the full PDF.