RockTheCapital.org

by Eric Epstein

Columnist Glen Thomas follows a litany of writers proclaiming the success of electric deregulation based on a single and misleading indicator - an increase in  the number of suppliers selling out-of-state and subsidized fuel products at inflated prices.

Defenders of deregulation cannot deny their promises, erase history or hide the economic facts on the ground. Deregulation was supposed to grow the economy, increase tax collations, and cut rates. At least that’s what Mr. Thomas and his cohorts promised 10 years ago.

On Aug. 4, 2000, Gov. Tom Ridge announced  that electric competition would lead to job growth, economic  expansion, and decreased rates. According to Ridge, “Pennsylvania’s national leadership in electric competition continues to bring dramatic  savings and economic benefits to Pennsylvanians.” Gov. Ridge added, "And, according to this new report, those savings and benefits will continue for  some time to come!”

So, let's check out the report. The Department of Revenue  released "Electricity Generation Customer Choice and  Competition” (August, 2000), and predicted free-market  nirvana. Secretary of Revenue, Robert A. Judge Sr., forecast  reductions in retail electricity prices would lead to the following economic impacts in Pennsylvania by 2004:       

The real gross state product will be $1.9 billion higher;     overall employment will increase by 36,400 full-time and  part-time jobs, nominal personal income will increase by  $1.4 billion; the price index will decrease by .47 percent;  and the population will increase by 51,400 people as workers are attracted to job opportunities in Pennsylvania.

The Department of Revenue also reported that deregulation would result in greater sales tax and Personal Income Tax collections.

Could the deregulators have gotten it more wrong? 

Electric companies are collecting $11.4 billion in stranded costs, shifting taxes onto the backs of property owners, dumping customers at record rates, and celebrating 20 percent to 30 percent rate increases.

Deregulation moved power plants to the local tax rolls under the assumption that utilities would pay at least the same amount to which they had been subject under real estate taxes. Oops, they did it again. By 2004 homeowners were paying an average 30 percent more in property taxes than they did in 1997. Meanwhile, electric utility companies are paying 85 percent less in taxes on their plants, down from about $120 million annually to about $20 million.

But it got worse for Joe the Plumber.   

Uncollectible accounts were supposed to decrease with the price of electric. Yet, deregulation’s “Consumer Protection Act” has produced a 113 percent increase in terminations. In the first eight months of  2008, PPL cut electricity to 28,561 customers, a 111 percent increase over the number of customers whose power was shut off during the same period in 2007. The statewide average was 24 percent.

This is a hell of a “success story” for the third oldest state in  the nation where citizens living under the federal poverty level has increased from 19 percent to 25 percent over the last 10 years.

Here, where the rubber meets the ideological road, a study  published by Carnegie Mellon University's Electricity Industry Center found, “On average, power users in restructured states  pay 2 to 3 cents per kilowatt hour more than customers in states  that didn't restructure.”

PPL ratepayers now enjoy the “choice” of choosing between  a 20 percent to 30 percent generation rate increase, and face a 5.3 percent distribution  rate increase next year.

These numbers are staggering and coincide with the  deteriorating health of Pennsylvania's shrinking middle class.  The promise of deregulation leading to  more jobs, lower taxes,  and affordable prices has turned out to be a profitable illusion for a select few.

by Eric Epstein

Dwight Evans (D-Philadelphia), the quintessential insider, declared during last year’s budget’s impasse that the budget, “Is a process. It’s a process.”

The problem is that all budgets are the result of a bad process. The budget process is annual exercise of reassembling Frankenstein's wallet. Even an entrenched bureaucrat like Senate Republican spokesman Erik Arneson conceded, "...our budget process is clearly dysfunctional and needs to be improved."

No kidding.

However, reforming the process is at the bottom of the legislative priority list. All the post-budget whining, crying and opining failed to address the collapse of reform safeguards enacted to protect the process.

Back in March 2007, House members moved to “allow complete examination of legislation,” and mandated a 24-hour waiting period after a bill is amended before a final vote is taken. Then Speaker pro forma, Dennis O’Brien (R-Philadelphia), gushed, "The populace in Pennsylvania has demanded that we make change. There are significant changes here."

Rick Fellinger of the Evening Sun reported, “After two days of feisty debate, House members approved a reform package Tuesday that will change the way they vote on bills and put new limits on how they spend taxpayer money.” (March 14, 2007)

Ancient history?

This year’s $28 billion budget version of pain and suffering was released around 10:00 pm on June 28. In reality, the deal was cut by the Governor and Caucus leaders earlier in the day. Rank and file - as well as the media and general public - were locked out of the process and given hours to decipher and review the details of a complex budget document.

Here comes the best part, one of the rules instituted to protect the public and curb budget shenanigans was a mandatory time out prior to voting on the budget.

Bam. The Senate voted unanimously to lift its six hour waiting period on the budget

The House appears to have waived its 24 hour rule prior to voting on HB 1186 creating the Department of Drug and Alcohol Programs and changing the PHEAA board. The bill passed the Senate in the afternoon of July 2 and passed the House before noon on the 3rd. That's less than 24 hours, so either the House suspended the rules with an unrecorded vote or the motion to proceed is the same as a motion to suspend the rules.

Wam bam.

Taken together, the votes were sharp and unmistakable shots across the reform bough.

Where was Rep. Josh Shapiro (D-Montgomery) and the vaunted Speakers Commission on Legislative Reform? What happened to the Senate GOP leadership's request for House Democrats to act on reform legislation? Where was Sam Smith (R-Punxsutawney) and his party’s PATH to reform? What happened to Sen. Jeffrey Piccola’s (R-Dauphin) call for Pennsylvania first special session on ethics and government reform?

Calls waiting.

The truth of this matter is that reform has come to mean nothing. We need a new moral vocabulary.

This year’s budget process was a rushed and hushed process.

Almost five years to the date of the late-night, pay raise scam, legislators waived off the rules that were temporarily erected to protect the public and taxpayers from back room deals.

The Governor and legislature stuck a collective middle finger in the public's reform eye. The rules have not changed to protect the innocent, and they are not going to change until we have a constitutional convention or a sustained, broad based insurrection against the political lard gumming up the works.

Press  Advisory
June 29, 2010

Contact:
Eric Epstein, Coordinator
lechambon@comcast.net
(717)-541-1101
 

Harrisburg, Pa. - On Tuesday July 6, 2010, reform organizations will convene a press conference in the Capitol Rotunda at 11:00 am to discuss the State of Reform and prospects for a Constitutional Convention five years after the infamous Pay Raise debacle of July, 2005.

Featured speakers include Tim Potts, Co-Founder, Democracy Rising PA, Matthew J. Brouillette, President & CEO of the Commonwealth Foundation, and Eric Epstein, Coordinator, RocktheCapital.Org

Back story:

The Pennsylvania House and Senate passed Act 44 at 2 a.m., July 7, 2005 increasing the salaries of officials in all three branches of government without public hearings, public debate or public knowledge.

Governor Edward G. Rendell signed the bill that evening, and told the media the following day, “It's legal [‘unvouchered expenses’] and that's all I'm going to say about it.”

Base Salaries in July, 2005 for the rank and file excluding, per diems, perks, PSAs, pensions and paid health insurance; prior to the pay raise, was $69,648 for rank and file.

The pay raise “...increased legislators' base pay to $81,050 - more than any other state except California - and most lawmakers received more money because of expanded stipends in the bill for leadership or committee posts. Individual members saw raises ranging from 16 to 54 percent.” (The Associated Press, Peter Jackson, How Pa. legislators' pay raise was born and how it died, September 14, 2006.)

As a result of public pressure, the General Assembly passed and Gov. Ed Rendell signed Act 72 of 2005 repealing the raise on November 16, 2005. Act 72 did not require those who had received increased salaries to return the funds.

In total, 158 lawmakers accepted the raise. Numerous legislators have opted not to repay the “unvouchered expenses” or donated the money to charity. These amounts can be applied toward pension calculations and verified through the State Employees Retirement System.

On September 14, 2006, the Pennsylvania Supreme Court ruled that “unvouchered-expenses” violated the state constitution, but did not order recipients to pay the money back. The Court also reinstated the pay raises for themselves and approximately 1,200 judges.

by Eric Epstein

I am convinced we are on the cusp of a pension debacle due in large part to our marriage to a defined benefits’ system. I also believe that we should implement defined contribution plans for incoming government workers.

I view this year’s version of “pension reform light” - docketed as House Bill 2497 - as a bookend to last year’s version of “pension reform dark” - House Bill 1828.

Flashback to last summer. No matter how you feel about state and municipal pensions, most Pennsylvanians agree that sunlight is the best cure for what ails our system. With that prescription in mind, you’ve got to wonder why the Senate passed far-reaching pension legislation under a bill initially designed to bail out Philadelphia.

HB 1828, as approved by the House, laid out the authority for the City of Philadelphia to raise $700 million over a five year period to prop-up ailing municipal pensions and balance the City’s budget. By the time the Senate Finance Committee reported the legislation to the floor, the twelve page text ballooned to a 97 manuscript. The scope was changed from a City of Philadelphia bailout to statewide pension changes affecting 41,000 police officers, 10,000 fire fighters, and tens of thousands of municipal employees.

The Senate legislation was classic “cut-and-gut” legislation.

Now - under the watchful eye and heavy-hand of Rep. Dwight Evans (D-Philadelphia) - comes the next, best pension delaying ploy: House Bill 2497.

HB 2497 sets the clock back for new state hires. This legislation creates a two-tier, hybrid retirement system. The newbies would be swaddled in pre-2001 pension guarantees. The bill would provide for longer vesting periods. Not a bad start.

But the plan is weighted down in false hope, and does not address the impending pension melt down. This package is a kinder, gentler pension Frankenstein.

"We don't think the current defined benefit plan is sustainable," PSBA Executive Director Thomas J. Gentzel said. Ok. But this legislation simply postpones the inevitable, and shifts a greater share of the tax burden from school districts to the state. Code for increased state taxes.

The tax shift does not deal with core spending and liability issues. In fact this legislation re-amortizes pension liabilities over 30 years. Together with PSERS’ unrealistic return assumptions of 8%, HB 2497 actually increases tax payer exposure for our kids.

Talk about kicking the can down a dead end road.

I find myself in agreement with State Sen. Pat Browne (R-Lehigh) who chairs the Senate Finance Committee. Mr. Browne called the proposal an improvement, but not a solution. "There needs to be a liability management plan," Browne said. "To just kick the can down the road and manage the liability without recognizing what is happening is plan redesign. It is not reform."

We need to create a defined contribution system for new hires that allows for a menu of options. This system would decrease the potential for an intergenerational bail out, increase user choice, and allow for optional, aggregate investment strategies.

by Eric Epstein

To the best of my knowledge, no person, corporation, organization or political party officially endorses waste as a business practice or political platform. Yet, this vast black hole continues to rotate and thrive around the twin laws of political physics - corruption and collusion.

This parallel universe is populated by hordes of wasteoids who comfortably nest within the major political parties and feed on their host - the taxpayer. They gain access through insider trading, campaign contributions, blood lineage, fraud, deception, and apathy.

Planet Waste is thriving and smothering political and economic competition.

Taxpayers are besieged with reports, investigations and convictions relating to welfare and weatherization fraud, ID theft, senior scams, airplane rides to work, pay raises, pension “bounces”, WAMs, judicial car washes, $5 bags of peanuts, no bid contracts, Pay to Play, charm school, Pay to Pray, culinary classes, “European facials, “Escape Pedicures,” falconry lessons, “Golfers Glow,” bad SWAPs, mud baths, “Polling for Dollars”, Bonusgate, 25 hour billing days, “Ghost Employees”, nepotism, and “Special Leadership Accounts.”

Waste, fraud, and duplicity have become the forth branch of government. Pennsylvanians are predictably overwhelmed by systematic, state-sponsored abuse. So, how do we confront waste and cultivate a culture of accountability?

Most states sponsor programs or departments that investigate abuse, fraud, and waste. Some states even reward whistle blowers. Pennsylvania maintains several offices for consumers and taxpayers to report bilking practices.

The Auditor General’s Office of Taxpayer Advocate provides a hotline #1-800-922-8477. The Advocate does not offer financial rewards, but asks, “If you know of or suspect waste, fraud or abuse in a state program, agency or other endeavor, please contact the Office of the Taxpayer Advocate.”

The Attorney General has several outlets including hotlines for consumer protection #1-800-441-2555 and health care #1-877-888-4877.

The Department of Revenue also enlists citizens to report fraud to a Taxpayers’ Rights Advocate (717)-772-9347. The Department allows for anonymous tips, but “does not offer monetary rewards for reporting tax evasion crimes.”

Yet, the waste stream continues to grow like a bloated deer tick. How do we arrest this plague? Do we need to consolidate departmental advocates into a dedicated and independent Government Accountability Office? Should we reward waste busting efforts?

We can implement measures to save taxpayers dollars by incentivizing waste and fraud reporting. But we risk creating one monster to devour another. Monetizing whistleblowing has merit, but it also raises issues of privacy, access to proprietary data, cyber invasions, and character assassinations.

We should evaluate the experiences in other states and examine Best Management Practices for combatting waste and fraud.

At a minimum, we need to strengthen existing portals for reporting waste and enhancing enforcement capabilities. Among the strategies we should consider include: increase sentencing guidelines for fraud offenses, facilitate better data sharing and interagency cooperation, increase surety bonds for contractors, and enhance and expand overpayment recovery efforts.

by Eric Epstein

Imagine a system that allows you to draw your own political districts, pick your personal voters, steal from taxpayers, raise your pay, vacation in far away places without spending any of your own money - and best of all - provides you with guaranteed lifetime employment, health care and a pension, no matter how worthless and unproductive you are.

Stop dreaming. Your home, comrade. This place is not a far away province stashed away in Russian literature. This is your back yard. Welcome to Pennsylvania.

Remember the old slogan, “America starts here.” Not any more. After the May 18, politburo affirmation exercise, we need to fess up and acknowledge our new tag line, “Political inertia vacation's here.”

Most of the deadbeats - and quite a few incumbents without heartbeats - coasted to victory without opposition. The rank and file fell into place without a whimper. The vaunted and overrated “reform class of 2006” and the new "greedership” of 2008” won reelection promising to deliver the same crap in a different pile.

Mr. Corbett bullied his way to anointment, and skillfully manipulated all the trappings of his office. Dan Onorato spent his way to a decisive plurality using the Governor’s Rolodex, and convinced voters that raising taxes to pave a road to nowhere is a virtue.

Here we go again! The IPP - Incumbency Protection Program -provided results less competitive than a Syrian primary or a Burmese general election.

It happens every election cycle. The IPP kicks into full gear, and the electorate grins and bears the brunt of a fictional democracy. The symptoms and results are the same: Voters call into radio shows, don’t show up at the polls or develop political amnesia. Politicians spend all their time and your money campaigning to keep their low-performance, bad results job.

What is their job? Duh, getting a budget done on time.

The political reality is devastating: This legislature and this governor - as well as the next Governor and next legislature - do not have the skill sets or calcium in their backbones to lead or govern.

The projected $2.3 billion state revenue shortfall is structural, and based on a $808 million MCARE gap, a transportation funding hole of $450 million, and a $720 million shortfall in tax collections through the first quarter of 2010.

Federal revenue, in the form of more stimulus funding, is an unlikely development during mid-term elections, and in a year when a Governor, with little political capital, is banking on $850 million in federal welfare.

Senate Republican have already advised superintendents to exercise caution when developing budgets, and predicted Gov. Rendell’s proposed $5.9 billion ($354 million increase) in basic education funding to support district operations is unlikely.

Yes, we’re on the cusp of another budget debacle. You may have forgotten last year’s heartfelt call for early engagement, a longer budget season or the Republican PATH to reform. Great campaign slogans; not reality. Don’t fret, the Governor and legislature remembered to forget last year too.

But it gets worse. These guys can’t even work with each other when they’re in town.

The Senate R’s don’t trust the House D’s. The House D’s are led by a retiring Speaker, and a Majority leader who is really a UFC combatant without a caucus. The House R’s don’t get along with the Senate R’s, and will do anything to gain the majority. The Senate D’s are MIA, but looking for WAMs. And the Governor is off auditioning for his next gig as a Fox commentator or Comcast sportscaster.

Confused? Don’t be. Gridlock is assured, and the budget won’t get done on time. The only thing the Republicans agree on is that they are not going to let Rendell break his seven year itch.

It’s time to face the facts. We do not live in a democracy. We don’t live in a republic. We live in a modern-day kleptocracy.

by Eric Epstein
 

Sometimes one must go to the past to rescue the future.

This is one of those times.

Discussions, debates, and diatribes relating to global warming and the development of a green economy invariably fail to account for the dark underbelly and economic burden associated with coal and nuclear energy.

Pennsylvania has paid a heavy price for fueling the industrial revolution: 51,483 people have died from mining accidents, and 2,400 miles of Pennsylvania’s waters have been polluted from coal mine drain off.

By the late 1950s acid rain's harmful footprint was detectable throughout Penns Woods, and in 1986 Elk County recorded the most concentrated acid rain figures in the nation. Pennsylvania has continued to receive more acid rain than any other state, damaging its natural resources, citizens, and economy.

In the 1970s, recession, stagflation and two Arab oil embargoes, propelled nuclear energy to the front of the subsidy trough. Cost overruns, nuclear waste, water use, and lessons learned from the coal era were put aside to embrace the magic energy bullet: nuclear power.

However, the worst accident in US commercial nuclear power history began on March 28, 1979 at Three Mile Island when the plant suffered a core melt down. Rate payers and taxpayers have doled out $2 billion for a plant that operated 120 days, and remains a high-level radioactive waste site in the middle of the Susquehanna River.

With the arrival of deregulation, Pennsylvania rate payers were left holding the bag on $8.5 billion in cost overruns for energy “too cheap meter” at the Limerick and Susquehanna nuclear generating stations.

Finally, in 2002 the US government announced a plan to reduce greenhouse gas intensity (the ratio of greenhouse gas emissions to economic output) by 18% over the next 10 years.

Pennsylvania, a traditional coal and nuclear state, had virtually no contributions for clean, green or alternative energy sources at the turn of the century. In fact, Pennsylvania’s renewable energy portfolio was limited to hydro power - most of which was exported out of state.

It’s past time to move Pennsylvania’s economy and environmental stewardship into the 21st century.

Rep. Eugene DePasquale has proposed to expand the green economy in Pennsylvania by introducing bipartisan legislation that would significantly boost the amount of energy in Pennsylvania derived from cleaner energy sources. The legislation would strengthen the Alternative Energy Portfolio Standards Act of 2004 by requiring 28% of Pennsylvania’s energy come from clean sources by 2024.

The current clean energy requirement is 18% by 2020. The proposed legislation would nearly double the share of energy that must come from the cleanest sources by requiring 15% of energy to be derived from wind, low-impact hydro, geothermal, methane gas, fuel cells, biomass energy, and solar.

Unlike the rate shock caused by deregulation, consumers would be protected in this legislation by requiring the state Public Utility Commission to delay the alternative energy requirements by the utilities if it determines the cost of compliance is too high or there isn’t enough alternative energy ready for the grid.

April 20, 2010

 

(Harrisburg, Pa) - Perception matters.

Elected officials are no longer above the law or below the radar.

Because of Bonusgate we must admit that voluntary, self policing polices regarding public service and political promotion have failed. From “cut and gut” legislation to pay raise madness to the back door pension scam to the budget debacle, Pennsylvania is sorely in need of an ethical transfusion.

All of the gubernatorial candidates are benefitting from holding one office while seeking to relocate to the Governor’s mansion. You can’t claim you’re working a full-time job on behalf of the people while simultaneously running a full-time campaign on behalf of yourself.

How many private employers pay their employees to look for another job on the company clock?

Attorney General Tom Corbett should resign, and allow the Attorney General’s office to fully commit itself to aggressively prosecuting Bonusgate and other political corruption cases.

Likewise, all candidates seeking the state’s highest office should resign their public charge and set a new standard for elected officials, including: Joe Hoeffel, Dan Onorato, Sam Rohrer, Jack Wagner, and Anthony Williams.

It’s past time for a “resign-to run” law in Pennsylvania. Five states, including Arizona, Georgia, Florida, Hawaii, and Texas, do not allow certain public officials from using their positions as an elective launch pad.

RocktheCapital.org supports a “resign-to-run” law that does not target officials, and is modeled on the Florida statute. Florida’s “resign-to- run” law prohibits elected or appointed “officers” from qualifying as a candidate for another state, district, county or municipal public office if the terms or any part of the terms overlap with each other if the person did not resign from the office the person presently holds. (Section 99.012(3), Florida Statutes.)

In addition, the practice of lending staff to a political campaign needs to be eliminated. A state employee is either essential all of the time or not needed any of the time.

by Eric Epstein

In 1970 we imported 24% of the oil we consumed. The  amount doubled by the time of Jimmy Carter’s epic energy  speech on April 18, 1977.

With the exception of preventing war this [energy crisis]  is the greatest challenge our country will face during our  lifetimes. The energy crisis has not yet overwhelmed us  but it will if we do not act quickly. It’s a problem we will  not solve in the next few years, and it’s likely to get  progressively worse through the rest of this century.  Many of the proposals will be unpopular. Some will  cause you to put up with inconveniences and make  sacrifices.  

Today we import 70% of the oil we use, and Americans  continue to consume a disproportionate amount of the world’s  reserves. But the percentage of foreign imports is misleading,  and not necessarily bad news when you diagnose where we  get our oil.

For example, OPEC’s share of American oil imports has  been sliced down to 56%, and 42% percent of  the weakened  cartel’s contribution comes from our allies in Iraq and Saudi Arabia. Both nations contain a significant American military  presence and vast reserves.  

The new real politick is that we have a diversified and  proximate addiction inventory. Three of our five main  suppliers - or 50% of the oil we import - are located in our  front and back yard. Canada, Columbia, Ecuador, Mexico,  Venezuela, and the Virgin Islands have displaced Middle  Eastern sources.

The geopolitical reality is that large stocks of regional  resources are currently being tapped. Contrary to public  opinion and political hysteria, drilling off the coast of  New Jersey, Delaware, Florida and Alaska is not a  panacea.  There are important, but limited oil reserves in American  waters, and there are risks to our multibillion dollar fishing and tourism industries.

However, before we drill, we need to know what we  have and where it’s located. The nation’s off shore drilling  data is from the Cold War. Job one is to conduct a thorough  due diligence of our assets. To Ken Salazar’s credit, part of Obama’s drilling plan is to conduct an inventory of our  resources.

Bobby Ryan, Chevron’s VP of global exploration, stated  on March 31, 2010: “We don’t have a good understanding  of the what the true potential is. Until you really get in there  with modern technology and evaluate it, you don’t really  know.”

The Interior Department’s current estimate of  economically recoverable reserves (assuming we don’t give  the leases away) in the areas covered under Obama’s plan  is 63 billion barrels of oil. What does that mean? Not even  a nine year supply for a nation that consumes 7 billion  barrels annually.

I’m not theologically opposed to offshore drilling, but  I am wary of making policy decisions that yield minimal  dividends down the road, especially when there are other  options.

American consumption appears to be stabilizing due  in large part to consumer awareness, improved automobile  standards, and increased ethanol use. American refineries  are operating well below capacity at a time when “margins  have bottomed out and there’s need to be a correction.   Demand is gone and not expected to return,” according to  Nathan Schaffer an industry analyst with PFC Energy.  (Wall Street Journal, April 9, 2010)

Just like off shore wind, there is a role for targeted  drilling after we complete the requisite due diligence.  The best way to protect future generations is to adjust  and decrease our oil consumption patterns.

In the meantime, wake up America and smell the  octane north and south of the border. Part of the answer  to our oil addiction is continue to import oil from the  same nations that provide us with hockey pucks, coffee,  and baseball players.

by Eric Epstein

The term loophole is derived from loupe which refers to  a narrow   opening in a wall. These slit-like windows or  “loopholes” were located in medieval castles, and used to  defend royal courts from incoming projectiles.

Modern-day corporate castles exploit antiquated loopholes to deflect their tax burden to small businesses. The primary  tax avoidance vehicle for  corporate behemoths is the Passive  Investment Company (“PIC”) subsidiary. The most infamous  PIC is the Delaware tax loophole also referred to as “Geoffrey  the Giraffe.” (Geoffrey is the Toys R’ Us “intangible” holding  company.)

Here’s how the scheme works: Under the corporate fiction  of the Delaware tax loophole, local outlets of large national chain  stores pay royalties to sister companies in other states, claiming the payments as business expenses, and then deduct them from their Pennsylvania state income taxes.  

In other words, “Geoffrey the Giraffe” allows large  corporations to pay little state income taxes in Pennsylvania.  Comcast, Crown Cork, Toys R’ Us and Wal-Mart are among  the corporations that minimize their Pennsylvania income tax  contributions through “intangible holding companies.”

However, many states have closed the Delaware loophole.  Back in 2004, the Governor’s Business Tax Reform Commission released a bipartisan report recommending changes to  Pennsylvania's medieval tax structure. The 12 member  Commission endorsed numerous measures to level the  playing  field, including uniform reporting to eliminate  the Delaware loophole.

That same year, Maryland officials attempted to  collect approximately $80 million in back taxes, interest and penalties from 72 corporations who used the PIC tax  moat. When Maryland abolished the loophole,  Philadelphia-based Crown Cork & Seal’s Delaware holding  company appealed the legislation. Crown used the Delaware  holding company to shelter income earned in Maryland   from state taxes.

The Maryland Court of Appeals ruled that Crown could  be taxed because it "had no real economic substance" as a  separate business entity. Crown’s Appeal to the Supreme  Court was also rejected.

For small businesses without interstate operations, the  Delaware Loophole is not an option. This tax scam forces  small businesses to shoulder a bigger share of the state tax  burden. In fact, the Department of Revenue reported Pennsylvania taxpayers lost $493 million through this  loophole or approximately 35% of the sum paid in state  business taxes last year.

So, what do passive investment companies look like?  Just take a virtual field trip to the top tiers of the Rodney  Square in Wilmington, Delaware, and you’ll find a who's who  of tax dodging. This building's upper-floors serve as the   "brass plate” headquarters to hundreds of corporations, including British Airways, Colgate-Palmolive, Comcast,  GE, the Hard Rock Cafe, Ikea, Nabisco, Pepsico, Seagram  and Royal Dutch Shell.

How do 700 corporate headquarters squeeze into five  narrow floors? How do 500 fit on the 13th floor alone?  "Frankly, it's none     of your business," said Sonja Allen,  part of the staff that runs this corporate center for  Wilmington Trust Corp. . . Some of my clients are  saving  over $1 million a month, and all they've done is bought the Delaware address," said Nancy Descano, holding  company chief     of CSC Networks outside Wilmington.   (Joseph N. DiStefano, “In the War Between the States,  Delaware is Stealing the Spoils,”Gannett News Service.)

It’s past time to close the loop, and fast-track Pennsylvania’s tax laws into modern times. Enacting uniform reporting and  eliminating the Delaware loophole is about tax fairness. Legislation  to nullify corporate tax-avoidance strategies allows the primary  engine of American capitalism - small business - to compete on a  level playing field.