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House Closes ‘Delaware Loophole,’ Cuts Business Tax Rates

By Ryan Mackenzie, State Representative of the 134th Legislative District

Pennsylvania’s corporate income tax rates are among the highest in the nation.  This barrier to job growth and economic development has driven investment out of our state and kept new businesses from locating here.  I recently joined the House in taking bold action to cut taxes on businesses and lure job creators back to the Commonwealth.

House Bill 440 would gradually reduce the Corporate Net Income (CNI) tax from just shy of 10 percent (9.99 percent) today to 6.99 percent by 2025.   This business tax cut is essential to making Pennsylvania competitive again. 

Our job growth has lagged behind that of other states.  According to a report last year from the Tax Foundation, Pennsylvania is ranked as the worst state in the nation for state tax costs on businesses. The report further confirmed that the Commonwealth’s unusually high business tax burden places us at a competitive disadvantage and hampers job creation.

The CNI tax rate in most states is about 7 percent.  At 3 percent above the national average, the current Pennsylvania CNI tax rate drives industry away.  House Bill 440 would bring our rates down to the national average, eliminating a significant obstacle to attracting new business.

In addition to reforming the corporate tax structure, House Bill 440 would close the “Delaware Loophole,” a long-standing drain on the Pennsylvania economy that encourages businesses to move their taxable assets out of state.  The Delaware Loophole is a legal way that some Pennsylvania-based businesses have circumvented the Commonwealth’s high corporate tax rates to reduce their tax liabilities.  These businesses transfer assets to affiliated companies located in Delaware to take advantage of that state’s more business friendly tax environment.  This practice costs the Commonwealth tens of millions of dollars in lost tax revenue annually. 

It is important to underscore that businesses using the Delaware Loophole are not the ones primarily to blame.   They are making sound economic decisions.  What’s at fault is a Pennsylvania tax law that discourages business development and inhibits job growth. 

State government does not create jobs; businesses do that.  State government, however, does create a tax environment that either promotes business success or failure.  I previously promised my constituents that I would work to close the Delaware Loophole and make Pennsylvania a more welcoming place for job creators.  I am pleased to say that with the passage of House Bill 440, we are well on our way to doing just that.

The measure now moves to the Senate for their consideration.  It is my hope that they will quickly pass it.

Representative Ryan Mackenzie
134th District
Pennsylvania House of Representatives
Media Contact:  Ryan Travis, 717.260.6335 /
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