Now that congressional Republicans and President Donald Trump have reduced the federal corporate income tax rate by 40 percent, state lawmakers should take it as a cue to reform the state government’s obsolete tax code.
The tax rate reduction from 35 percent to 21 percent will save corporations about $1 trillion over 10 years.
Meanwhile, Republican majorities in the state Legislature steadfastly refuse to enact two major corporate tax reforms that not only would help the state government resolve its systemic deficit — estimated to be about $1 billion by the close of the current fiscal year June 30 — but more fairly distribute the tax burden.
Pennsylvania has a 9.9 percent corporate tax rate, which companies and politicians alike lament as being burdensome, even though relatively few companies, especially big ones, actually pay that rate.
Lawmakers continue to maintain a tax evasion scheme known as the Delaware loophole. Many large corporations evade tax liability in Pennsylvania, using the loophole to report their income through corporate shells in low-tax or no-tax states such as Delaware.
Lawmakers repeatedly have refused to act on proposals to close that loophole. But now that corporations will be awash in cash due to the 40 percent reduction in federal tax liability, it’s time for legislators to close the state’s door to corporate tax evasion.
The Legislature should reduce the state corporate tax rate by about a third, which would make the state more competitive and provide a break to mostly smaller companies that actually pay the tax. And, it should require what’s called combined reporting by companies that now operate under the Delaware loophole, to ensure that they pay taxes on revenue generated here.
The massive federal tax cut also applies, of course, to companies in the natural gas industry. Barclays, the big investment bank, estimated Thursday that the tax reduction alone will increase by 5 percent the share prices of major gas and oil companies, equivalent to a $1-per-barrel increase in oil prices.
And the bill includes another massive break, allowing drillers to expense 100 percent of their capital costs over five years.
Lawmakers’ excuses for coddling the gas industry always have been bogus. The industry is well-established and profitable. Its markets are growing, with substantial government help.
The federal tax breaks mean there is even less reason for the Legislature not to impose a fair tax on gas extraction. Imposing one finally would end Pennsylvania’s foolish, politically based status as the only gas-drilling state not to have a severance tax.
— The Citizens’ Voice, The Associated Press
Net neutrality bill falls short
The Federal Communications Commission’s decision to let big internet service providers treat the internet as if they own it created a responsibility for Congress to intervene in the interest of consumers.
Unfortunately, the first effort to do so falls well short.
Recently, the FCC repealed regulations that had established “net neutrality,” which holds that the internet should be easily and equally accessible to all consumers and anyone who wants to post content. Under the FCC’s abandonment of responsibility, access to the internet by creators and access to web content by consumers could be manipulated many ways by the big ISPs to increase their own profit — especially because most of those companies also own or have close relationships with content production companies.
Dec. 19, Republican Rep. Marsha Blackburn of Tennessee introduced the Open Internet Preservation Act, which would not achieve the title’s goal even though the bill includes some sound provisions.
The bill would bar ISPs from blocking or slowing internet traffic, which is a needed provision. But other parts of the bill would bar the FCC and state governments from acting to prevent ISPs from manipulating traffic in other ways. And, it would preclude the FCC from treating the ISPs as utilities, which permanently would spare them from most public regulation. And it provides a giant loophole, allowing the ISPs to do what they deem necessary for “reasonable network management,” without defining it.
Congress’ objective should be true net neutrality. It should keep the best provisions of Blackburn’s bill in that regard, but close its loopholes and mandate FCC regulation.
— The Times-Tribune, The Associated Press