Pennsylvania’s newly enacted state budget is not perfect — no budget bill ever is, especially in a divided government.  But, despite a very polarized environment, this bipartisan budget is incredibly impactful as it includes several pro-growth reforms that collectively represent a game-changer for PA’s business community. It addresses several key areas that will help Pennsylvania become more competitive, attract new businesses, and drive economic growth.

Our state’s leaders, especially Senate President Pro Tempore Kim Ward, Senate Majority Leader Joe Pittman, Governor Josh Shapiro, as well as other House and Senate leaders deserve credit for getting these improvements across the finish line.

One of the most impactful changes is starting the process of eliminating Pennsylvania’s Start-Up Tax by reforming how the state tax code treats the carryforward of Net Operating Losses (NOLs). This term refers to a tax provision that lets businesses take the losses they incurred during a taxable year and “carry them forward” into future tax years, where they can be deducted from future income to reduce an employer’s overall tax liability.

NOLs allow businesses, particularly those in early stages or cyclical industries like manufacturers, to continue to invest and hire despite challenging fiscal times. This is a key reform that will help attract new businesses to Pennsylvania, support those already here, and help reverse the worrisome trend of population stagnation and decline we’ve experienced for decades.

Pennsylvania is currently tied for last place among all 50 states for its punitive treatment of NOLs with only a 40 percent deduction allowance – this is half of the federal rate. Thus, PA effectively imposes a special tax on start-ups that is virtually nonexistent in every other U.S. state.

Fortunately, Pennsylvania’s 2024-25 state budget gradually removes this start-up barrier by prospectively improving the tax treatment of NOLs. Specifically, losses incurred by businesses in 2025 and beyond, will be able to be utilized as a higher deduction when a company does have a positive bottom line in the future.  The deduction rate will increase by ten percentage points annually, until it reaches parity with the federal rules (80 percent) in the year 2029.

This removes a major barrier for companies looking to move to PA, and for entrepreneurs and small businesses, this means more resources to grow and thrive. This reform will help position Pennsylvania as a more attractive place to start and expand a business.

The budget also continues the phasedown of the Corporate Net Income Tax (CNI) at a rate of one-half percent per year, further reducing Pennsylvania’s extraordinarily high tax rate (previously the second highest in the country) which for years discouraged investment in the Commonwealth. Next year, the CNI will drop from 8.49 percent to 7.99 percent, followed by annual reductions until it reaches 4.99 percent in 2031.  This impacts businesses of all sizes as the U.S. Chamber cites that 84 percent of all CNI tax payers have 20 or fewer employees. Lower taxes help attract employers and allow organizations to invest in hiring new employees, increasing wages, expanding innovation, and will ultimately contribute to our state’s economic growth.

Additionally, Pennsylvania’s permitting systems — which have long been criticized for significant delays, administrative challenges, and a lack of transparency — will see several significant improvements made thanks to a bipartisan directive included in this year’s budget.

The new Streamlining Permits for Economic Expansion and Development (SPEED) Program is designed to reduce delays in construction and other development projects by allowing third-party technical reviews of several key Department of Environmental Protection permits, codifying clear timelines for action, adding accountability measures, and establishing transparent tracking systems.

This should be welcome news for everybody! For businesses, this means getting projects off the ground faster while still ensuring compliance with important environmental protections. By making the permitting process more efficient and transparent, Pennsylvania is signaling that it’s open for business and ready to encourage new investments.

The budget also makes substantial investments in building a skilled workforce. Increasing funding for career and technical education (CTE) by 21 percent will help address the skills gap and better prepare Pennsylvanians for high-demand jobs. These initiatives are critical for businesses looking to expand in Pennsylvania, as they help ensure a steady pipeline of skilled workers.

Incentives for employers to reimburse employees for childcare expenses and increased funding for workforce housing will also help attract and retain a diverse workforce. Additionally, investment into transportation will help improve accessibility to jobs, making it easier for Pennsylvanians to get to work and for businesses to find the talent they need.

These significant achievements were made possible through strong collaboration between the PA Chamber, state legislators, and the Governor’s office — resulting in a budget that addresses some of the most pressing issues facing Pennsylvania’s business community. By improving our tax policies, streamlining permitting processes, and investing in workforce development, this year’s budget lays the groundwork for a more competitive and prosperous Pennsylvania.

The PA Chamber wants to especially thank Senate Leaders Ward, Pittman, and Martin for leading on these issues, as well as Governor Shapiro and all of Pennsylvania’s bipartisan leaders for their work in making these vital reforms a reality. By working together, we can create a brighter future for all Pennsylvanians – and we are just getting started.

Luke Bernstein is president and CEO of the PA Chamber of Business and Industry.