The state’s outdated tax provisions limit growth potential in Pennsylvania.
HARRISBURG, Nov. 21, 2019 – Members of the state Senate and House announced their plan today to supercharge Pennsylvania’s economy, which has lagged behind the rest of the nation. The three bills would help to drive small business growth, expansion, and job creation. The tax package would also align Pennsylvania’s laws with federal tax law, making compliance easier and less complex. It would make the state more consistent with other states, putting Pennsylvania’s small businesses on an equal footing.
“Small businesses will flourish if these changes are made to our state tax code and that’s good for the Pennsylvania economy and makes us more competitive,” said Gordon Denlinger, state director of NFIB in Pennsylvania. “We have seen a surge across the country in small business expansion and hiring ever since the federal tax law was updated, and this will have a similar impact on our state.”
- HB 105/SB 201 would amend the state tax law to match the federal government’s allowance of tax deferral when property is exchanged for a similar property. For example, a small business could trade a vacant piece of property that it does not need for industrial property of the same value that it can use to expand without incurring a state tax liability. Pennsylvania is the only state that does not permit like-kind exchanges for small businesses.
- HB 333/SB 203 would allow small businesses to take the full expensing deduction the year an asset is purchased, helping owners buy equipment, machinery, or other expensive items that are necessary to grow their businesses. The limit would increase from $25,000 to $1 million to match federal tax law, the recent expansion of which has stimulated business growth and capital investment across the country. Pennsylvania’s extremely restrictive cap places its businesses at a competitive disadvantage and limits opportunities for growth.
- HB 1603/SB 202 would permit small business owners to use a net operating loss against a tax bill to better cope with downturns in the business cycle. This is especially helpful to start-ups and small businesses that typically experience cyclical markets for their products. Corporate taxpayers can already do this under state law.
“Since small businesses don’t have access to the capital that larger companies have, their ability to use such tax strategies helps them have greater control over their financial positions,” said Sen. Judy Ward, sponsor of SB 202. “For example, if an owner sells some personal items to help the business make payroll, that owner can take the business loss against his or her tax bill created by selling the personal items.
Rep. Seth Grove said, “Removing obstacles for small businesses allows them to compete effectively, which helps grow more jobs for current and future generations. This omnibus package of bills would remove unfair tax obstacles small businesses must face. Small businesses are pillars of the economy, creating 65 percent of jobs in the Commonwealth. These bills would allow them to compete effectively, so they can grow more jobs for current and future generations.”
Small businesses, including small manufacturers, professionals, farmers, retailers, and other entrepreneurs, are truly the backbone of Pennsylvania’s economy and its local communities. Over 99% of businesses in Pennsylvania are small. They hire half of our workforce and create two out of every three new jobs. Ensuring that small business owners have access to the resources necessary to expand and invest in their businesses is an investment in the state’s economy.
Nationally, the economy has remained exceptionally strong under federal tax reform, and small business optimism has been at record levels. The most recent economic data from NFIB shows an October increase in the number of small business owners across the country planning job creation, inventory investment, and capital spending. But in Pennsylvania, small businesses are hindered by outdated state tax laws that frequently differ from federal law. These tax bills will help to eliminate some of those disadvantages.
Organizations supporting the package of tax bills include:
AIA Pennsylvania
Chester County Chamber of Business & Industry
Manufacturer and Business Association
National Federation of Independent Business
Northeast Pennsylvania Manufacturers and Employers Association
PennAg Industries Association
Pennsylvania Chamber of Business and Industry
Pennsylvania Farm Bureau
Pennsylvania Food Merchants Association
Pennsylvania Manufacturers’ Association
Pennsylvania Restaurant and Lodging Association
Pennsylvania Retailers’ Association
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For more than 75 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is nonprofit, nonpartisan, and member-driven. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses, and remains so today. For more information, please visit nfib.com.
