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Thursday, December 29, 2005

Will the General Assembly override Gov. Rendell's veto?

With strong bi-partisan support of a meager tax cut in both houses of the General Assembly, enough votes exist to override Gov. Rendell's veto. Rep. Dave Reed is the first to call for such action.

Also, note that Rep. Reed calls the legislation an "anti-outsourcing" bill. As the Commonwealth Foundation has long noted, the problem isn't "outsourcing," per se, but "outFORCING" -- the forcing out of jobs because of bad economic policy emanating from Harrisburg.

We are glad to see elected officials like Rep. Reed recognizing that state government can do a lot to improve Pennsylvania's business climate. It is not India or China we need to worry about, it is the public policy being developed along the Susquehanna and Potomac Rivers. Directly addressing the economic problems in the Commonwealth (particularly the high costs of doing business in the state) will do more to keep jobs in PA than will any carping against foreign nations or any corporate welfare program developed in Harrisburg.

Rep. Reed's press release follows.


Governor vetoes Reed’s anti-outsourcing bill
Hopes rest on override of veto

Text of Dec. 28 press release from Rep. Dave Reed

Just days after Gov. Ed Rendell vetoed legislation sponsored by Rep. Dave Reed (R-Indiana) that would have reduced the state personal income tax and established a single sales factor to encourage job creation by replacing the existing formula for the Pennsylvania Corporate Net Income (CNI) tax, Reed said he would work with colleagues in the state House and Senate in an attempt to override the governor’s veto.

"Mr. Rendell had a choice to make when he considered House Bill 515," Reed said. "He could sign it and be an enabler of tax relief to keep our manufacturing jobs in Pennsylvania, or he could veto it in an attempt to obstruct tax relief and send more of our manufacturing jobs to other states and nations. Mr. Rendell made the wrong choice.

"Mr. Rendell supports a ‘pay as you go’ strategy, where the people of Pennsylvania pay while he goes and spends their money. He was given a chance to lower taxes for Pennsylvania families, mom-and-pop businesses, manufactures, and high-tech job creators. Mr. Rendell said the Harrisburg piggy bank couldn’t live without your money. He was given the choice between tax relief or government spending. He chose government spending.

"This is the first bill dealing directly with the causes of outsourcing to hit the governor’s desk since his manufacturing summit in 2003. We gave him an opportunity to deliver on his promise. It appears this was a promise given but not a promise kept."

Reed will now work with colleagues in the House and Senate in an attempt to override the governor’s veto. Thirty-three Senators and 135 members of the House must support the bill to overturn the governor’s veto. The bill received support from 35 Senators and 183 members of the House upon final passage.

"We have the support we need in both the House and the Senate" Reed said. "We need to make sure people keep their word and stick to their guns."

House Bill 515 was passed by the House on May 10. The bill was amended by the Senate to include additional components of the Keystone Manufacturing Initiative (KMI) economic growth plan, a series of bills proposed by Reed and other House Republicans aimed at growing Pennsylvania’s economy. The bill was returned to the House which passed the measure with amendments. The Senate concurred with the House version of the bill.

"The House and Senate, republicans and democrats, stand firmly on the side of Pennsylvania taxpayers and Pennsylvania job creators," Reed said. "I’m not quite sure whose side the governor is on, but he’s not standing here with us."

The current CNI formula taxes businesses on three factors: in-state payroll (20 percent of liability), in-state property assets (20 percent), and in-state sales (60 percent). Under this formula, an employer’s taxes go up every time they hire another worker or expand the physical property of their business. Reed’s legislation would phase out the existing formula and base the CNI tax solely on in-state sales.

The percentage of tax liability based on in-state sales will rise from 60 percent to 100 percent over the next four years, phasing out the old CNI formula in favor of Reed’s Single Sales Factor formula.

"The old formula penalized job creators with higher taxes every time they hired new employees or expanded their plant," Reed said. "This legislation removes that penalty and encourages businesses to grow and expand right here in Pennsylvania."

House Bill 515 was introduced to combat what Reed called a "stacked deck" against Pennsylvania job creators.

"There’s a lot of talk about outsourcing. But what people often don’t hear about is that family-sustaining manufacturing jobs in the United States are twice as likely to move from one state to another than they are to leave the country," Reed said. "The House and Senate are talking about protecting jobs and providing tax relief. Meanwhile, the governor is talking about how his government pet projects can’t live without the higher taxes."

House Bill 515 is part of a 16-bill package of legislation known as the Keystone Manufacturing Initiative (KMI). KMI bills are designed to protect Pennsylvania’s manufacturing sector, which directly employs 685,000 Pennsylvanians and generates over $64 billion in economic activity each year.

The KMI focuses on six key economic areas, including business tax structure reform, affordable health care, tort reform, workers’ compensation reform, unemployment compensation reform, and regulatory reform.

House Bill 515 was amended to include additional provisions of the KMI. The bill expands the net operating loss carry-forward. The cap, currently set at $2 million, would increase over the next four years to $10 million or 75 percent of available losses, whichever is greater.

The bill also would reduce the state personal income tax from 3.07 percent to 3.05 percent over the next two years.

House Bill 515 also is part of the House Republican Playbook for Progress plan to increase fiscal accountability, promote personal responsibility and expand economic opportunity.

"While we would like to work with the governor to reduce taxes and spur job creation, in this instance he has left us with no choice," Reed said. "When he stands against working families and mom-and-pop businesses, we can’t allow his obstructionism to impede Pennsylvania’s progress. If he will not lead or follow, he must not get in the way."

Contact: Dan Massing, (717) 772-9845


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