Business leaders blast Rendell retroactive $2B tax increase

Gov. Ed Rendell just can't help himself. He's a spendoholic. He's addicted to spending other people's money. And he gets that money through taxes.

A day after warning that Rendell's proposed income tax hike would cut at least 24,000 jobs in the state, a coalition of business leaders is sounding the alarm about Rendell's retroactive $2 billion tax increase that would further damage Pennsylvania's economic recovery.

The National Federation of Independent Business/Pennsylvania, the Pennsylvania Business Council, the Pennsylvania Chamber of Business and Industry, and the Pennsylvania Manufacturers' Association joined together to issue a statement criticizing Rendell's plan to retroactively increase the Capital Stock and Franchise Tax (CSFT) to 2.89 mills and lock that higher rate in place.

That move would inflict at least $2 billion in additional taxes on the productive sector over the next three years, the business group says.

From a release issued by the coalition:

"Pennsylvania is one of the only states in the nation to tax both business income and business assets," said David N. Taylor, executive director of the Pennsylvania Manufacturers' Association. "Because the CSFT is essentially a property tax, employers are forced to pay it even in times like these when they're losing money. With all of the challenges facing employers in this recession, the CSFT phase-out is the last pro-growth element in the state budget and sacrificing it now will only delay Pennsylvania's economic recovery."

PA Chamber Vice President Gene Barr noted that the CSFT phase-out was enacted due to widespread bipartisan acknowledgment that the tax is unfair because it has no relation to a company's profitability.

"The last thing we should be doing is delaying again the elimination of this major deterrent to business livelihood and growth. We have to make sure job creators come out of the economic downturn positioned for recovery," Barr said.

The business groups noted that Rendell himself opposed delaying these tax cuts earlier this year.

From the group's release:

In his remarks, Gov. Rendell claimed: "I am not – I repeat - I am not raising taxes on businesses. I am proposing that – in this recession – we delay further business tax cuts." But by raising the CSFT from 1.89 mills – the rate the Department of Revenue has collected from employers since January 1, 2009 – to 2.89 mills, Rendell is indisputably raising taxes on businesses.

As Rendell might recall from his February 4, 2009 budget address, delaying the CSFT phase-out is a bad idea because "rais[ing] these taxes at this time could cause a reduction in much-needed spending and business investment."

"The global recession is painful for everyone," said Pennsylvania Business Council President & CEO David W. Patti, "but it will end and when it does, Pennsylvania cannot be less competitive than it was before. In a global economy, employers 'shop price' and Pennsylvania is an expensive place to do business. Failing to end this tax now will make Pennsylvania even less attractive."

In its 2009 "Rich States, Poor States" report, the American Legislative Exchange Council ranked Pennsylvania’s economic performance as 46th in the nation and Pennsylvania's economic outlook as 42nd. From 2005 through 2008, Pennsylvania's Gross Domestic Product grew at less than 3/4th of the national average.

"The sooner we eliminate the Capitol Stock and Franchise tax, the sooner we can eliminate other costly corporate welfare programs that Pennsylvania now needs to lure business to the Commonwealth," said NFIB State Director Kevin Shivers.