In personal income tax, further providing for imposition of tax, for when withholding not required, for returns and liability and for return of Pennsylvania S corporation.
Summary
HB1742 would phase out Pennsylvania’s personal income tax beginning with taxable years starting on or after January 1, 2026. The bill amends the Tax Reform Code to keep the current 3.07% personal income tax rate in place only through December 31, 2025, and then prohibit the imposition of that tax thereafter. It also removes related withholding and filing requirements tied to the personal income tax for post-2025 taxable years.
In addition to ending the personal income tax, the bill would eliminate the requirement for employers to withhold Pennsylvania income tax from wages beginning January 1, 2026. It would also end the filing obligation for individual taxpayers and Pennsylvania S corporations for taxable years beginning on or after December 31, 2025. The bill includes conforming language repealing inconsistent laws and regulations and takes effect immediately.
Impact
HB1742 would substantially alter Pennsylvania tax law by repealing the state personal income tax for future taxable years and eliminating associated withholding, return-filing, and S corporation reporting requirements. The Department of Revenue, employers, individual taxpayers, estates, trusts, and Pennsylvania S corporations would all be affected. Because the bill removes a major state revenue source, it would have broad fiscal implications for the Commonwealth and would require significant changes to tax administration and compliance systems.
Sentiment
No committee transcript or vote record was provided, so there is no direct evidence of debate, amendments, or recorded support/opposition. Based on the bill text alone, the measure appears to be a major tax-cut proposal with a clear policy direction, but the available record does not show how lawmakers or stakeholders responded. The absence of voting history also means there is no documented sentiment from committee or floor action in the materials provided.
Contention
The central point of contention is likely the elimination of the personal income tax itself, since that would significantly reduce state revenue and shift the burden of replacing those funds to other taxes, spending cuts, or both. Supporters would likely emphasize tax relief and simplification, while opponents would likely focus on the fiscal impact on state services and the loss of a stable revenue stream. Secondary issues include the removal of employer withholding and the end of filing obligations, which would simplify compliance but also require major administrative changes.
In personal income tax, further providing for imposition of tax, for when withholding not required, for returns and liability and for return of Pennsylvania S corporation.
In personal income tax, further providing for definitions, providing for elective tax imposed at pass-through entity level and further providing for taxability of partners and for income of a Pennsylvania S corporation.
In personal income tax, further providing for definitions, providing for elective tax imposed at pass-through entity level and further providing for taxability of partners, for income of a Pennsylvania S corporation and for income taxes imposed by other states.