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Pennsylvania became more business-friendly this year, according to a new report that pushed its ranking past four other states compared to the previous year.The Keystone State climbed from 28th in the nation to 24th for most competitive tax code this year, according to <a href="http://tlgets.me/jz6" target="_blank">the 13th annual State Business Tax Climate Index</a>, a report released Wednesday by the nonpartisan <a href="http://tlgets.me/jz7" target="_blank">Tax Foundation</a> in Washington, D.C.The report measures how well-structured each state&#8217;s tax code is by analyzing over 100 tax variables in five different tax categories: corporate, individual income, sales, property and unemployment insurance.The breakdown of Pennsylvania&#8217;s rankings this year is as follows (1st is best, 50th is worst):&#8226; Corporate tax structure: 44th&#8226; Individual income tax structure: 17th&#8226; Sales tax structure: 20th&#8226; Property tax structure: 32nd&#8226; Unemployment insurance tax structure: 45thPennsylvania&#8217;s overall rank of 24th bests four of its six neighboring states&#8217; ranks: Maryland at 42nd, Ohio at 45th, New York at 49th and New Jersey bottoming out at 50th. Wyoming received the top overall score.Franchise tax repealJared Walczak, a policy analyst with the Tax Foundation and a co-author of the report, said the final repeal this year of Pennsylvania&#8217;s franchise tax (which had an intended final repeal of 2014) is what gave the state the significant boost in rankings.The franchise tax is a tax imposed on the overall value of a business, rather than on its net income or profits. Such a tax can have a severe detrimental impact on a business that performs poorly or experiences significant losses in a given year, and &#8220;most states are getting away from&#8221; this type of tax, Walczak said.In 2014, Pennsylvania&#8217;s franchise tax was set at 0.67 mills; in 2015, it dropped to 0.45 mills; and it was phased out altogether this year. A mill is $1 in tax for every $1,000 of assessed value.&#8220;It makes the state more attractive for businesses,&#8221; Walczak said, adding that existing Pennsylvania businesses experiencing a downturn no longer being hit with a substantial tax burden can make all the difference in a company making a comeback.&#8221;Other taxes, tax breaksPennsylvania also ranks well in individual income tax structure because many small corporations can pay the state&#8217;s relatively low individual income tax rate &#8212; 3.07 percent &#8212; instead of the much higher corporate tax rate.Walczak said Pennsylvania is ranked low for its corporate and unemployment insurance tax structures because at 9.9 percent, the state&#8217;s corporate tax rate is second highest in the nation, and the state has higher unemployment insurance tax rates than most other states.Walczak also noted that Pennsylvania provides tax breaks that are &#8220;substantially carved out for select businesses,&#8221; pointing to years of tax-exempt status for businesses located in Keystone Opportunity Zones.&#8220;So you have this non-neutral treatment&#8221; for some businesses &#8220;while others face the brunt of the the 9.9 percent rate because, of course, if someone is getting a preferential rate, someone else has to pay for it,&#8221; Walczak said.A part of the equationWico Van Genderen, president and chief executive officer of the Greater Wilkes-Barre Chamber of Business and Industry, said Pennsylvania&#8217;s tax climate is just &#8220;part of the larger economic equation to retain and draw business to the area.&#8221;&#8220;The key driver is in the supply chain value proposition, and from that perspective, PA and the NEPA area fare quite well,&#8221; van Genderen said. &#8220;We have a great labor force with a positive work ethic. We have a relatively low cost of living and housing index. We have sustainable and abundant utilities and accessibility to a great transportation infrastructure.&#8221;When you couple in Pennsylvania&#8217;s tax structure with those benefits, he said, it becomes a relative factor.And while individual and personal income tax, property tax and sales tax are reasonable and competitive nationally, Pennsylvania&#8217;s biggest hurdle is the corporate net income tax and corporate capital gains tax, van Genderen said.Because while the overall Pennsylvania tax climate is competitive when compared to neighboring states where tax rates are higher, compared nationally, Pennsylvania&#8217;s CNI tax is a competitive disadvantage for business, he said.<ins>&#8220;Certainly there are loopholes in the PA tax structure that make it somewhat attractive for large, out-of-state, national companies to do business here and avoid PA taxes, but by and large, it does not help companies that are headquartered here or want to be headquartered here. Nor does it help build upon a positive business model for the small-to-midsize to entrepreneurial companies to start up, grow and thrive here,&#8221; van Genderen said.</ins><ins>All that said, there is room for improvement to help Pennsylvania retain and attract business through a revision of its state corporate tax, according to van Genderen.</ins>&#8220;In a recent Chamber survey with our members, a large segment of businesses saw a need to streamline the CNI, close out the loopholes and thus allow for an overall lowering of the CNI (tax). This would allow the small-to-midsize to entrepreneurial companies to grow organically, create better paying jobs and stay in the state,&#8221; van Genderen said.&#8220;Likewise, it would allow for Pennsylvania and NEPA to attract, retain and expand businesses,&#8221; he added. &#8220;The net result would make the state&#8217;s business structure more vibrant, and open the welcome sign to attract more businesses to the area.&#8221;<style>
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<div class="neCaption">van Genderen </div></div><div class="metaInfo"><photo0>https://www.timesleader.com/wp-content/uploads/2016/09/web1_VanGenderen-Wico.jpg</photo0><caption0>van Genderen </caption0><photoCredit0></photoCredit0></div><div class="neFile"><img class="neImage" src="https://www.timesleader.com/wp-content/uploads/2016/09/web1_2017-SBTCI-National-Map.jpg">
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<div class="metaInfo"><bylineMeta>By Steve Mocarskysmocarsky@www.timesleader.com</bylineMeta></div><div class="metaInfo"><factboxMeta>HOW THEYSTACK UPStates&#8217; overall ranking in tax competitiveness.1st &#8212; Wyo.2nd &#8212; S.D.3rd &#8212; Alaska4th &#8212; Fla.5th &#8212; Nev.&#8230;24th &#8212; Pa.&#8230;46th &#8212; Minn.47th &#8212; Vt.48th &#8212; Calif.49th &#8212; N.Y.50th &#8212; N.J.&#8212; 2017 State Business Tax Climate Index</factboxMeta></div><div class="metaInfo"><shirttailMeta>Reach Steve Mocarsky at 570-991-6386 or on Twitter @TLSteveMocarsky.</shirttailMeta></div>

Study: PA became more business-friendly, but corporate tax rate needs a fix