Pippy: Senate Approves Sweeping Tax Cut Package

Reduces Personal Income Tax, taxes on employers.

Harrisburg – The state Senate has approved a sweeping tax cut plan developed by Senate Republicans to provide more than $280 million in relief to families and small businesses, according to Sen. John Pippy (R-37) who voted for the legislation.

Pippy said a key component of the measure approved Wednesday is a two-step reduction in the state Personal Income Tax, which is levied on individual wage earners and small businesses in the Commonwealth.

"If the tax went up when the recession hurt state revenues, it should go down now that revenues have picked up," said Pippy. "Let families and small businesses keep more of the money they earned."

The first phase, set for 2006-07, would reduce the PIT rate from the current level of 3.07 percent to 3.03 percent, which would provide $120 million in savings for individual taxpayers and small businesses. Under phase two, set for 2007-08, the PIT rate would drop from 3.03 percent to 2.98 percent, which would provide an estimated $160 million in savings for individuals and small businesses, said Pippy.

The Senate passed the tax cuts as an amendment to House Bill 515, which was returned to the House of Representatives for consideration.

In addition to the PIT cuts, said Pippy, the legislation would promote economic growth and job creation through a package of $325 million in tax cuts on job creators over the two-year period. The business tax cut package includes an expansion of the Net Operating Loss cap to $20 million and a reduction in the Corporate Net Income Tax rate from 9.99 percent to 9.59 percent in 2007-08.

"That's $325 million employers can use to invest in new equipment, expansion and hiring more workers, rather than mailing it to Harrisburg come tax time," said Pippy. "We are competing with surrounding states for jobs, and these reductions will help Pennsylvania retain jobs and attract new ones."

The Senate Republican initiative to cut taxes follows last week's passage of legislation that would limit state government spending and set aside surpluses in a new fund to reduce the PIT.

Senate Bill 4, the Taxpayer Fairness Act, would hold state spending increases to inflation by statute. A companion measure, Senate Bill 884, would make the spending limits part of the state constitution. The bills would set aside half of surplus revenues in the state's Rainy Day Fund for use in times of economic necessity and half in a new Taxpayer Fairness Fund to reduce the PIT.

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CONTACT: Matt Campion (412) 571-3822