Business leaders greeted Rendell's proposal to cut the corporate income tax rate 20 percent and make other revisions in the state's tax code with a mixture of cautious optimism and ingrained skepticism.

		Taxes

Rendell suggested lowering the corporate net income tax rate to 7.99 percent from 9.99 percent. The reduction would leave Pennsylvania with the 18th-highest corporate tax rate. It currently has the third-highest.

Rendell also proposed abandoning the use of payroll and property in figuring the corporate income tax and basing the levy solely on a company's in-state sales. The measure is intended to encourage businesses to locate and expand here.

"It sounds like he's doing his best to improve the business climate," said Dennis L. Zeitler, chief financial officer of Mine Safety Appliances of O'Hara.

U.S. Steel spokesman John Armstrong said the company applauded the proposed tax rate reduction but said "there are many other factors of the budget we need to study."

Said David N. Taylor of the Pennsylvania Manufacturers' Association: "It's definitely a mixed bag and we're not thrilled with it."

A business tax advisory panel appointed by Rendell last year recommended cutting the corporate tax rate to 6.99 percent. Revenue Secretary Greg Fajt, who chaired the panel, said the package was meant to be a take-it-or-leave-it deal rather than an a la carte menu.

The smaller proposed cut in the corporate net income tax wasn't the only change from the earlier agenda. Rendell also dropped a proposal that would have increased taxes for many small businesses, said Lee Taddonio, vice president of SMC Business Councils, a lobby group.

"We're happy to see that he's apparently backed away from that," Taddonio said.

Rendell also proposed requiring businesses to report more information to the Revenue Department. The system, currently used in California and 15 other states, would broaden the tax base by identifying what Fajt called "aggressive tax planning" by companies seeking to lower their tax bill. Taylor said the new reporting system would be "a regulatory nightmare."

"The administrative burden and costliness of this cannot be understated," he said. "There are still lawsuits going on in California over the imposition of that system 30 years ago."