171-year-old Pennsylvania tax comes to an end

HARRISBURG - A Pennsylvania business tax that predated the Civil War and in modern times pumped hundreds of millions of dollars a year into state coffers has been swept away with the new year.

The 171-year-old capital stock and franchise tax expired Thursday as 2015 ended, Revenue Department spokesman Gary Miller said Monday.

Efforts to phase out the tax began under Gov. Tom Ridge in 2000, but the timetable was modified several times to soften the impact on revenue.

Gov. Tom Corbett, a fellow Republican, implemented the final phaseout schedule, and Democratic Gov. Wolf let it stand as part of his business-tax reforms in this year's budget plan.

Gene Barr, president and chief executive of the Pennsylvania Chamber of Business and Industry, said the tax was unfair because it forced businesses to pay on their assets even if they did not turn a profit.

"The prolonged and unpredictable nature of the phaseout, which included repeated delays and freezes, created uncertainty for employers and drove investment opportunities to states with friendlier tax climates," Barr said.

But State Rep. Joe Markosek, the ranking Democrat on the House Appropriations Committee, said the phaseout of the tax has compounded the ongoing money woes that have contributed to a state budget stalemate, now in its seventh month.

"It's a tax that a lot of folks will be happy to see go," the Allegheny County lawmaker said. "At the end of the day, we have to find replacement revenue, which is more the issue now in my mind."

Pennsylvania-based businesses subject to the tax paid it on their capital stock value, while corporations organized in other states paid the franchise tax portion on the value of their capital stock attributable to Pennsylvania, according to the Revenue Department website.

In the budget year that ended June 30, the last full year the tax was in effect, it provided $242 million in revenue, but had generated several times that much in previous years, the department said.