Governor's Budget Proposal: The Impact on Small Business

Date: February 13, 2017

Plan calls for $1 billion in new taxes

Gov. Tom Wolf’s 2017-18 budget plan includes an array of increased taxes totaling $1 billion, and calls for an expansion of the sales tax on certain items. The Governor’s plan increases spending by $571 million. 

Below is a list of new taxes in the plan that would impact small businesses:

  • A sales tax will be added to custom computer software and computer services, to commercial storage services (excluding farm product storage, warehousing storage and transportation services). It extends the sales tax to aircraft maintenance, aircraft sales and the food or beverages supplied to airlines.
  • A 6.5% tax on natural gas extraction that could impact the small businesses that serve the natural gas industry.
  • A change in the tax code on corporations that limits a net operating losses to 30%, instead of the previous rule of either $5 million or 30%.
  • Adding an Insurance Premiums Tax to insurance companies that were previously exempt.

Other elements of the Governor’s budget plan that would impact small business:

  • A call for a $12 dollar an hour minimum wage which will particularly impact hospitality, retail, and seasonal businesses. It does not appear from information that is currently available that there is any phase-in planned for this increase.

The Governor has also proposed to:

  • Increase training dollars ($12 million) for Pennsylvania manufacturing jobs (details are not yet entirely clear).
  • To reduce the use of tax credits by $100 million (there is insufficient information in the proposal to clarify which tax credits are targeted). And to demand the return of economic development funds from businesses that don’t deliver on promised job creation or subsequently move out of state.
  • To have a single point of contact for businesses through the Dept. of Economic and Community Development to help businesses cut through red tape (there is limited detail on this initiative).

The Governor’s plan does not include a broad-based tax increase in the Personal Income Tax or the percentage of Sales Tax.

 

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