Governor Josh Shapiro presented his annual budget address on February 4, 2025. His fiscal year budget proposal of $51.5 billion represents a nearly $4 billion increase over the 2024-2025 fiscal year budget. The Governor intends to fund the budget from the state’s Rainy-Day fund and increased tax collections.
The main tax-related measures in the Governor’s proposal include:
- Reducing the Corporate Net Income Tax by 0.75% each year to reach 4.99% in 2029 two years ahead of the scheduled reductions that were part of the 2022 budget under former Governor Wolf.
- Adopting uniform filing requirements (combined reporting) for Pennsylvania Corporations effectively eliminates the “Delaware Loophole” whereby large businesses shift income outside the Commonwealth for tax purposes.
- Eliminating taxes on financial institutions including the bank and trust company shares tax, mutual thrift institutions tax, and private bank tax.
- Regulating skill games including video gaming terminals and imposing a 52% tax on the gross terminal revenue. The governor’s office estimates that 70,000 terminals in Pennsylvania can be regulated and taxed.
- Legalizing marijuana on July 1, 2025 and imposing a 20% tax on wholesale cannabis.
Republicans in the Pennsylvania Senate were critical of the proposed budget, including the 7% increase. Several republicans stated that the money is not there to fund the budget and approval of this budget will ultimately lead to higher taxes in Pennsylvania.
If you have questions on State and Local Tax matters, please contact the HBK SALT Advisory Group at hbksalt@hbkcpa.com.
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