A candidate for governor, who happens to be a businessman, calls for the closure of a tax loophole.
That businessman, Tom Wolf, says he doesn’t take advantage of the Delaware loophole. But his company did switch its charter to Delaware in 2006, a move that Wolf has said was made at the purchaser’s request. And that purchaser, who remained a minority owner after Wolf bought back his company in 2009, required that the charter of York-based Wolf Holdings Organization be kept there.
If not for tax purposes, why did Wolf’s company incorporate in Delaware?
The loophole, according to the Pennsylvania Department of Revenue, costs the state about $500 million per year in corporate net income tax collections.
Hundreds of companies doing business in Pennsylvania use it to lower their taxes. They do so by paying royalties to sister-owned companies in other states that have lower corporate net income tax rates. Then they claim the write-offs as “business expenses” and deduct them from their corporate income tax payments here in Pennsylvania.
The Wolf campaign is right to note that Gov. Tom Corbett, the man Wolf seeks to defeat in November, has no proof that his company took advantage of the loophole.
Case closed, according to the Wolf campaign in response to last week’s call by Lancaster County Republicans for Wolf to release his company’s tax returns from the past 10 years.
Wolf campaign spokesman Jeffrey Sheridan said the burden of proof is on Wolf’s critics to prove he is taking advantage of the loophole.
To do so, as the Wolf campaign no doubt knows, would be illegal, as tax filings are not public records.
It would be one thing if Corbett was calling for the loophole’s closure and demanding that Wolf release his company’s tax returns as a result.
In that scenario, the Wolf campaign’s defense would make sense.
Given that closing the loophole is Wolf’s proposal, the burden of proof shifts. If he’s against the loophole, Wolf should either acknowledge using it and say it should be closed for all, or prove that his company does not use it.
Wolf should release his company’s tax returns — the sooner the better — to put this issue back where it belongs, in the realm of legitimate policy discussion.
While the loophole itself might not be defensible, it raises another important issue: Maybe Pennsylvania’s corporate net income tax is too high if it is causing companies to seek such shelters.