This page was last updated on April 14, 2011.
Corbett is double talking on taxes; Dan Sainovich, Jr.; Beaver County Times; April 14, 2011.
I have to admit to a challenge critiquing “Dan Sainovich” letters over time. The reason is this. Over the last 5+ years, letters from Industry/Ohioville have been signed Dan; Dan, Jr.; Danny; and Danny, Sr. It appears there is a minimum of two “Dans” and a maximum of four. All of the “Dan” and “Dan, Jr.” letters espouse lefty positions and examples are here, here, here, here, here, and here.
Below is a detailed critique of the subject letter.
“It’s time for a fair state budget.
“Gov. Tom Corbett has asked state employees to take a pay cut. Did he cut the legislators’ budget? No.”
[RWC] Not true. According to the proposed 2011-2012 budget, the GA budget drops from $301.6 million this fiscal year, to $297.3 million in FY 2011-2012, and to $293.3 million the following year.
“Education slashed: Higher education slashed by 50 percent, community colleges by 10 percent, and kindergarten through 12th grade cut 20 percent, but there has been no guidance on how to make this happen.”
[RWC] Even if we could reduce “the legislators’ budget” to zero (and we can’t) we’re talking about only 1.1% of the General Fund budget. While that’s about $295 million and is a lot of money, it’s only about 7% of our pre-budget $4.1 billion deficit. While just about every aspect of government spending needs to be cut, the really big-ticket items need the most attention. That brings us to education and health & human services funding. Even in the proposed budget, General Fund spending on education is 38.9% of the total. Health & human services is in first place with 43.5% of the total. Simple addition (82.4%) tells us no other category even comes close to these two. “Protection of Persons and Property” comes in a distant third at only 11.2%.
“There is a strong public support for a reasonable Marcellus gas extraction fee. No way, he says, I promised not to raise taxes.
“But in his budget, Corbett proposes to raise the taxes on the people who own the gas (royalty owners) by removing a depletion tax allowance that has been available since the 1920s. Why tax the royalty owners? Most are farmers and property owners who don’t have a loud voice but have finally found good fortune.”
[RWC] I don’t know where Mr. Sainovich gets his info, but I found nothing to support his assertion, either in the budget itself or in a Google search.
“He wants to reduce the corporate tax rate. Good idea, but he cannot reduce the tax rate from zero, which is the rate that many (larger) corporations pay because of the Delaware Tax Loophole. Many large corporations (see Wal-Mart) set up their corporate offices (mail boxes) in Delaware and are exempt from Pennsylvania corporate tax while many of our small businesses pay their share.”
[RWC] To begin, I oppose so-called “business taxes” for at least two reasons. First, corporation income taxes are double taxation. That is, the government taxes a corporation’s taxable income and then taxes the dividends shareholders [including pension plans, IRAs, and 401(k)s] receive. Second, business taxes are a scheme to hide true taxation from the ultimate taxpayers, you and me. In some cases, businesses are prohibited by law from itemizing taxes on their invoices. You see, businesses - like government - don’t have any money; it all belongs to the owner(s). One way or another, business taxes are paid by individuals - customers, employees, and owners. According to the Tax Foundation, the average U.S. taxpayer worked eight days in 2002 to pay federal income taxes levied on corporations. In addition, we worked a fraction of a day to pay other business taxes. Business taxes are approximately seven percent of our total personal tax burden. That is, seven out of 100 tax dollars we pay are business taxes.
Note Mr. Sainovich’s use of the term “loophole.” A loophole is a legal provision of the tax code you don’t like, usually because you don’t believe it benefits you personally. For example, if you didn’t like the home mortgage interest deduction because you rent or your house is paid for, you would call it a loophole because the deduction reduces the tax liability of taxpayers who can use it. You would claim the deduction (loophole) allows some taxpayers to escape paying their “fair share” of taxes. That’s what Mr. Sainovich is doing with legal provisions of the PA tax code. To increase collections, Mr. Sainovich wants to eliminate certain legal deductions and/or exemptions. What follows is some information Mr. Sainovich probably doesn’t know or chooses to ignore.
The reason provisions like the “Delaware Tax Loophole” exist is to help mitigate the problem of a high tax rate. At a flat 9.99%, PA’s Corporate Net Income (CNI) tax is second only to Iowa’s top rate of 12% for income over $250,000. In addition, PA corporations must also pay the Capital Stock and Franchise (CSF) rate of 2.9 mills, fifth highest in 2010. Pennsylvania is one of a minority of states imposing both CNI and CSF taxes. As of 2009, Pennsylvania and Massachusetts were the only two states that ranked in the top 10 for both taxes.
According to the Tax Foundation in 2010, “If Pennsylvania were its own country, it would have the highest overall corporate tax rate in the world at 41.5% (federal plus state, accounting for the state-local deduction).”
“Governor Corbett, be fair to all.”
© 2004-2011 Robert W. Cox, all rights reserved.