State Representative Dave Reed yesterday re-introduced legislation to close Pennsylvania’s so-called “Delaware loophole”, the flaw in the state’s tax code that allows companies to make their profits here but keep an office in Delaware and pay taxes there, with much more favorable rates.
Reed says closing the loophole would help create a competitive level playing field so that all businesses would have a fair chance at success. However, the Delaware loophole is only one part of the problem. A 2012 Tax Foundation report ranked Pennsylvania as the worst state in the nation in terms of taxes on businesses, and Reed says the state needs to create a tax structure that welcomes job creation.
His new bill provides the same tax reforms as the bill he introduced last session, which passed the House 129-58. It would use the revenue raised by closing the loophole to bring about other tax reforms, including a six-year phased-in reduction of the corporate Net Income Tax from 9.99 percent to 6.99 percent. It would also phase out the existing cap on Net Operating Losses over nine years.