Letter to PA General Assembly in Opposition to Expansion of Sales Tax on Banking/Financial Services

December 2, 2005

Re: Opposition to Expansion of Sales Tax on Banking/Financial Services

Dear Representative/Senator:

On behalf of the Pennsylvania Association of Community Bankers (PACB), I am writing to share with you our deep concerns and opposition with proposals in the General Assembly that would expand and impose the sales tax to professional services including banking and financial services.

PACB is the oldest financial services association in the nation, dating back to 1877. Our association represents over 175 community banks across the Commonwealth, all dedicated to serving and reinvesting in their communities through residential mortgages, small business loans, and agricultural and student loans. The proposed legislation to expand the sales tax to services would greatly impede our ability to fulfill our mission of community reinvestment and development.

Banking is already heavily burdened as one of the nation’s most over-regulated industries, and the effect of over-regulation truly hinders our community banks. The recent Sarbanes-Oxley federal law exacerbates our regulatory plight and creates greater dependency on legal and accounting services, which, according to our review and understanding, would be taxed by all the proposals expanding the sales tax including that being offered by Rep. Mario Scavello in the House.

All these plans are without question a burden for banking customers, particularly those with lower incomes, and the access they need to key financial services. The sales tax on banking and professional services also hits hard the small-to medium-sized business our members serve throughout Pennsylvania. These businesses, the mom and pop operations that we all frequent and depend upon, are the engine of our economy and the lifeblood of the communities we serve. Taxing banking and other vital professional services will substantially increase their cost and their ability to remain competitive in today’s marketplace.

We acknowledge the dedicated efforts of the Legislature to relieve school property taxes for its citizens, but this sales tax expansion proposal is not the way to do it. We urge your opposition to any proposal that would expand the sales tax to professional services including banking.

If you have any questions about our position, please do not hesitate to contact me, or Rick Cessar or Dave Transue, our government affairs consultants.

Thank you for your consideration of our position.

Sincerely,

Frank A. Pinto
President/CEO