Lawmakers, Revenue Officials Spar Over Tax Proposals
Republican members of the state House Appropriations Committee this week sparred with Revenue Secretary Dan Hassell over parts of Gov. Tom Wolf’s 2021-2022 fiscal year spending plan. The hearing was the first of this budget season in which state lawmakers delved into the details of the governor’s $37 billion proposal.
Wolf’s plan to increase the state’s personal income tax (PIT) rate came under the harshest line of criticism. Lawmakers questioned the constitutionality of the governor’s proposal, arguing that it violates the uniformity clause and would essentially replace Pennsylvania's flat tax with a progressive one. Wolf is proposing a PIT rate increase from 3.07% to 4.49%, a 46% increase, coupled with an expansion of the state’s tax forgiveness program, which gives Pennsylvanians a refund or reduction of their income tax liabilities depending on their income and family size.
Under current Pennsylvania law, the current tax forgiveness thresholds are $6,500 per claimant and $9,500 per dependent with a 10% decrease in forgiveness for every $250 in additional income. Under the governor’s proposal, those thresholds are increased to $15,000 per claimant and $10,000 per dependent with a 1% decrease in forgiveness for every $500 in additional income.
“Raising the thresholds for tax forgiveness is long overdue. The thresholds for this program have not been increased since tax year 2003,” Hassell told Appropriations Committee members. “Accounting for inflation, the parameters for tax year 2021 would need to be over $48,000 just to keep the same level of income for forgiveness. Conceptually, the increase in tax forgiveness really just helps families keep up with inflation.”
Lawmakers also questioned Hassell on a number of other items, including the differences in the revenue estimates between the Independent Fiscal Office (IFO) and the Wolf administration, the governor’s proposal to legalize recreational marijuana, and a proposed minimum wage increase.
House Appropriations budget hearings continue the week of Feb. 22. Senate hearings begin the week of March 8.
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PICPA to Testify Before Pa. House Majority Policy Committee
Jason Skrinak, CPA, will provide testimony to the Pennsylvania House Majority Policy Committee. The hearing will focus on Gov. Wolf’s proposed tax changes and what it means to working families. Skrinak, founder of Pivot Strategic Consulting LLC in Harrisburg, is a member of the PICPA State Taxation Committee.
Others testifying include Elizabeth B. Stelle, director of policy analysis with the Commonwealth Foundation, Jared Walczak, vice president of state projects at the Tax Foundation, and Matthew Rousu, dean and professor of economics at the Sigmund Weis School of Business, Susquehanna University.
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Greiner Bill to Change Corporate Tax Return Due Date
State Rep. Keith Greiner (R-Lancaster) will introduce legislation supported by the PICPA that would change the due date of Pennsylvania corporate tax returns from 30 days after the due date of the federal return to the 15th day of the month following the due date of the federal return. Greiner notes that his proposal is technical in nature, creating more predictability and eliminating confusion for corporate taxpayers.
Other tax proposals are starting to be introduced in the state legislature. Here is a quick look at a handful of the bills the PICPA and its State Taxation Committee are currently reviewing.
Rep. David Hickernell (R-Lancaster) is working on legislation to increase from $8,000 to $20,000 the personal income tax threshold whereby a taxpayer is required to make estimated payments. Under Hickernell’s proposal, a taxpayer receiving income that is not subject to withholding in excess of $20,000 would be required to make estimated payments to the Department of Revenue.
Rep. Anthony Deluca (D-Allegheny) reintroduced House Bill 515, legislation requiring tax collectors, upon notice, to send tax notices to mortgage servicers. Currently, tax collectors are only required to send a tax notice directly to a property owner. This can create uncertainty, and sometimes property tax bills are inadvertently left unpaid. The legislation would require that, if requested by the mortgage servicer, a notice will be sent within 10 days to the servicer and the property owner notified.
Sen. Lisa Boscola (D-Northampton) reintroduced legislation, Senate Bill 197, that would permit owners of homestead properties to deduct their real estate taxes from their state income taxes. Because federal tax law caps local and state tax deductions at $10,000, many property owners could face a new federal tax burden as a consequence of the capping of this deduction.
Rep. Natalie Mihalek (R-Allegheny) is working on legislation to reduce the corporate net income tax rate by 1% each year over the next four years.
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Still Time to Register for PICPA Virtual Advocacy Updates
Don’t miss an opportunity to speak directly to state senators and representatives about the 2021-2022 Pennsylvania budget and other legislative issues affecting your clients and your practice. You still have time to sign up for one of PICPA Advocacy Updates with State Legislators.
Sign up today (see sessions below). Members may attend any session of interest. Remember to submit your questions in advance.
- North Central & Northeastern | Feb. 24
Sen. John Blake (D-Lackawanna, Luzerne, Monroe), Senate Finance Minority Chair
Rep. Aaron Kaufer (R-Luzerne), House Finance, Subcommittee on Tax Modernization and Reform Committee Chair
- Erie & Northwestern | Feb. 25
Rep. Donna Oberlander (R-Clarion, Armstrong, Forest), House Majority Whip
Sen. Joe Pittman (R-Armstrong, Butler, Indiana, and Westmoreland), Senate Urban Affairs and Housing Committee Chair, and Senate Consumer Protection and Professional Licensure Member
- Lehigh Valley & Reading | Feb. 26
Rep. Matt Bradford (D-Montgomery), Minority House Appropriations Committee Chair
Sen. Judith Schwank (D-Berks), Minority Caucus Administrator and Senate Appropriations Committee Member
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Sen. Baker Preparing Pandemic Liability Protection Measure
Sen. Lisa Baker (R-Luzerne), chair of the Senate Judiciary Committee, is leading an effort to protect businesses, schools, universities, manufacturers, nonprofits, and others from lawsuits related to COVID-19.
Specifically, Baker’s legislation provides for limited, temporary, and targeted COVID-19-related liability protection for those who have attempted to comply with state and federal COVID guidelines.
The legislation also would protect against litigation based on claims of ordinary and gross negligence for businesses that donated supplies or provided them at cost while protecting against claims of gross negligence for all other covered entities. For higher levels of alleged misconduct, such as intentional wrongdoing, the avenue to potential legal remedy remains open.
Baker championed a similar proposal last fall that Gov. Wolf vetoed.
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Sen. John Blake to Resign from Pa. Senate
State Sen. John Blake (D-Lackawanna) announced that he will be stepping down from his seat to take a position with U.S. Rep. Matt Cartwright (D-8th District). Blake will resign effective March 8.
In a press conference announcing his decision, Blake noted, “It has been a very difficult and emotional decision for me. I have served the 22nd District for more than a decade. I've given 10 years of my life to the office and the people of the district, and I have been privileged and honored to serve.”
“Sen. John Blake will be missed in our caucus. Since he was elected 10 years ago, he has been committed to serving his constituents and has always been their outspoken advocate in every piece of legislation he has introduced, board he has served on, and speech he has given on the floor of this body,” noted Sen. Jay Costa (D-Allegheny), Senate Democratic Leader.
The seat will be filled in a special election that will be set by Lt. Gov. John Fetterman.
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Democrat Candidate Selected for Westmoreland County Special Election
Mariah Fisher has been selected as the Democratic candidate for the special election in the state House’s 59th District. Fisher is a member of the Ligonier Borough Council since 2017. The election will fill the vacant seat previously held by state Rep. Mike Reese (R-Westmoreland), who died unexpectedly on Jan. 2. Republicans have not yet selected their candidate.
The special election will take place on May 18, the same day as the Pennsylvania primary.
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