As required by the Pennsylvania State Constitution, Governor Wolf delivered his annual budget address this week.  An historic first, the address was delivered in virtual format and was impressively high in production value. Unfortunately for NFIB’s small business membership, the content of the message was yet more bad news in the areas of business taxation and labor costs. 

Nationally, about 92% of small businesses are registered as Subchapter-S income tax filers who pay their business taxes at the Personal Income Tax (PIT) rate.  Here in Pennsylvania, Subchapter S businesses – which are also called passthrough entities – pay the current PIT rate of 3.07% on bottom line income. For example, pass-through businesses include LLCs, Partnerships, Sole Proprietors, and S-Corps.  

Calling it a “leveling of the playing field for business”, Governor Wolf has proposed a 25% cut in Pennsylvania’s Corporate Net Income Tax (CNI) rate – the rate paid by larger corporations (C-Corps). But he called for an INCREASE of 46% in the PIT – the rate that almost all small businesses pay – to 4.49%.   What this means is that Governor Wolf seeks to shift much of the business tax burden from major corporations onto the backs of most of NFIB’s small business owners.   

Governor Wolf also again proposed his desire for an increase in the state-government mandated minimum wage to $15 per hour. Despite studies that have shown negative consequences for low and non-skilled workers, the Governor and his allies continue the push for this jobs-killing proposal.  As we continue to navigate through the COVID crisis, unemployment among lower-skilled workers is tragically high.  And, making it harder for small businesses to hire workers, offer extended hours, or simply maintain the current employee compliment is wrong-headed.  

The good news, and yes there is good news, is that the annual budget address is only the beginning of the months-long budget process.  Many of NFIB’s pro-small business allies who hold office in Harrisburg will be pushing back on these proposals. And you can count on your NFIB Harrisburg team to lead the charge in opposing policies that will have negative impacts to your ability to survive and thrive in 2021.  Standing together, we can, and we must push back.  The survival of Pennsylvania’s small business economy demands it!