Aug. 11--The latest bad budget idea from Senate Republicans in Harrisburg is an effort to give a select few big corporations a sweetheart tax break.

The half-baked proposal sounds as if it was dreamed up by a lobbyist, and even has a special-interest-sounding name: the "single sales factor."

Beyond the uneven policy aspect, the timing of this tax cut is especially poor. State lawmakers can't agree on how to close the current budget gap. A tax cut would only widen it.

The cut is tilted mainly in favor of big firms with lots of clout in Harrisburg. It would lower taxes for some companies with a higher proportion of sales outside the state, such as Pittsburgh-based PPG Industries, U.S. Steel, and Hershey Foods.

Meanwhile, about twice as many firms whose business is entirely within the state would see their taxes rise. The Pennsylvania Budget and Policy Center, a left-leaning think tank, estimates that 10,000 companies in the state would face permanent tax hikes.

Worse, this proposal would drain revenue from the state treasury when painful budget cuts already are being readied due to a $3.2 billion shortfall. Former state Revenue Secretary Tom Wolf said half the gains from this giveaway would go to less than 4 percent of affected companies.

To give a select few big companies a tax break while boosting taxes for others and cutting funding for hospitals and schools would be particularly soulless.

It was something of a miracle that Republican legislators accepted Gov. Rendell's proposal to suspend the scheduled elimination of another business tax, the capital stock and franchise tax. This levy was supposed to be phased out at the end of 2010; freezing it at current levels will bring the state treasury an extra $373 million for one year.

But to Senate Majority Leader Dominic Pileggi (R., Delaware) and his troops, forgoing one planned tax cut is akin to a tax hike. And tax increases are off-limits for the GOP -- even no-brainers such as a tax on smokeless tobacco and cigars, something 49 other states have.

So the Senate GOP came up with its quid pro quo for agreeing to Rendell's freeze on one business tax: a $100 million giveaway for certain companies. The "single sales factor" would drain much of the revenue gained by preserving the capital stock and franchise tax.

The argument for this cut is that it would create jobs. But there's no convincing evidence from other states that it works.

Pennsylvania's business taxes ought to be reformed in a comprehensive way. For example, changing to "combined reporting" would require multistate corporations to pay their fair share for doing business in Pennsylvania. But the legislature annually dodges tackling this responsibility.

By closing loopholes in corporate taxes, not creating new ones, the legislature would create a fairer system.

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