Corbett changed business tax rules on his own, costing PA. $200 million in business taxes

Last year, soon after taking office, Corbett on his own did two things.

1. Congress in 2010 had provided tens of millions to PA. and other states for the specific purpose of avoiding teacher layoffs. The school districts expected that these unbudgeted funds would be used to avoid public school teacher layoffs in the 2011-12 school budgets. Instead, Corbett transferred the money into the 2010-10 budget, which had been approved months earlier.

2. On his own, he changed PA.'s business tax depreciation rules. A progressive think-tanks immediately issued a report that it would cost PA. $200 million. Corbett insisted their math was wrong. Guess what happened? It cost PA. $200 million in revenues.

PA. was under no obligation to make the change, and the legislature had not approved it.

http://blogs.mcall.com/capitol_ideas/2012/02/revenue-secty-meuser-sidesteps-on-closing-tax-loopholes.html

February 21, 2012

"A combination of overpayments in estimated taxes, the rollback of the Capital Stock and Franchise tax and the state's decision to fully embrace so-called "bonus depreciation" contributed to the roughly $288 million hole in corporate tax collections this year, state Revenue Secretary Dan Meuser told a Senate oversight panel this morning.

Meuser told lawmakers that gap was partially created by businesses overpaying on their estimated tax payments in fiscal 2010-2011. The state's decision to embrace 100 percent depreciation, which allowed businesses to claim depreciation on their assets in a single year, was also a factor, punching about a $200 million hole in the budget.

When the state returns to 30 percent depreciation in fiscal 2012-13, its collections should stabilize. Democrats have roundly criticized the administration for its action, charging that it handed businesses a tax break even as the state cut money to public education and welfare programs."

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http://www.pennlive.com/editorials/index.ssf/2012/02/some_of_pennsylvanias_budget_w.html

"Some of Pennsylvania's budget woes harken back to corporate tax change

By Steven Burg - professor of history at Shippensburg University, and Brendan Finucane - professor of economics at Shippensburg University.

February 03, 2012

"According to the state’s Independent Fiscal Office, the year-to-date shrinkage of corporate tax collections below the Revenue Department’s prior estimates has been “generally attributable” to the decision to permit corporations to write off as expenses 100 percent of investment expenditures made from Sept. 8, 2010 to Dec. 31, 2011 — a practice known as “bonus depreciation.”

This “bonus depreciation” reduced corporate tax liabilities and caused tax collections to shrink. Though the Center on Budget and Policy Priorities had forewarned of the sizeable revenue impact of granting the 100 percent depreciation allowance, Pennsylvania decided to provide this generous tax break and to implement it without legislative action.

The Department of Revenue’s projections regarding the cost of the tax break significantly underestimated the loss of revenue. At budget hearings held last spring, it had predicted tax implications of $69 million for 2010-11 and $132 million for 2011-12, as compared with the actual $260 million reduction for the first half of the current fiscal year.

...The current revenue shortfall is not an accident, but the result of a deliberate policy decision made by the state."