By, David N. Taylor
President & CEO of the Pennsylvania Manufacturers’ Association
Even after two decades in Harrisburg, the cynicism of some politicians can still surprise me.
This afternoon, Governor Tom Wolf will hold a bill signing ceremony for Senate Bill 1056, now Act 72 of 2018. Even as we express our gratitude to Sen. Michelle Brooks (R-Mercer), Rep. Frank Ryan (R-Lebanon), and all of our legislative allies, Act 72 became necessary ONLY due to the actions of Governor Wolf and his Department of Revenue.
In the quiet of the Friday before Christmas, the Pennsylvania Department of Revenue published a policy change covering depreciation of capital investments, disallowing all depreciation on assets subject to 100 percent federal bonus depreciation. Furthermore, cost recovery of the asset would only be allowed at the time the asset would be sold or otherwise disposed of. For many manufacturers, this would never happen. Simply put, the tax policy changes enacted unilaterally by the Wolf Administration made Pennsylvania un-investable.
At the time, a Revenue spokesman wrote in an email that the new policy is needed to spare the General Fund from lower collections. Under the change, Pennsylvania businesses would have overpaid hundreds of millions in taxes, endured greater administrative burdens by having separate state and federal compliance records, and been an outlier among states with this new policy, forfeiting capital investments the federal changes were designed to encourage. Manufacturers, which are inherently capital-intensive, would have been particularly hard hit.
Even worse, the policy change issued by Governor Wolf’s Department of Revenue was made retroactive to the start of the Tax Cuts and Jobs Act. Any business that was bringing home earnings from overseas, as the Tax Cuts and Jobs Act was designed to encourage, would never consider Pennsylvania as a place for investment and expansion under this rule. Because of this, we will never know how much business investment Pennsylvania missed out on from December 23, 2017 through the legislative fix signed on June 28, 2018.
Senator Brooks and Representative Ryan were both champions in their respective chambers to fix this harmful rule-making by Governor Wolf’s Department of Revenue. We thank them for their hard work in explaining this complex tax issue to their colleagues and implementing a legislative remedy. Governor Wolf, who was Ed Rendell’s Secretary of Revenue, deserves no credit for solving a problem he caused.