Business tax loopholes that allow companies to steer their revenues to lower-tax states or countries have cost Pennsylvania hundreds of millions of dollars, and closing the loopholes would allow the state to reduce its corporate tax rate, according to testimony given at a state House hearing yesterday.

"It's about tax fairness," said David Levdansky, D-Forward, who has introduced House bill 1775, which would change state accounting standards to close the so-called Delaware loophole.

It's called that because Delaware is one of the "low-tax" states that encourages the establishment of holding companies. Gov. Ed Rendell has sought, with no success, to close the loophole for the last seven years.

Two dozen states require an accounting method known as "combined reporting," which if enacted in Pennsylvania would require that companies doing business in the state combine total revenues, including the money made by its various subsidiaries and parent companies, before determining what portion is taxable in Pennsylvania.

Seven have made the change to combined reporting since 2004, including Texas, which is usually seen as a business-friendly state.

The House Majority Policy Committee - meaning Democrats were the only ones there - met yesterday at the University of Pittsburgh's student union.

Michael Mazerov, senior fellow of the Center on Budget & Policy Priority, said combined reporting would enable the state to collect more from certain multistate, multinational corporations, which theoretically would reduce the share of taxes paid by small businesses and individual taxpayers via the income tax.

Business groups are opposed to the changes, saying they would hurt companies in a time of financial uncertainty. Testimony given by the Pennsylvania Chamber of Business and Industry said "combined reporting would not be revenue neutral for key industry sectors. In fact, some industries and individual businesses would pay significantly more taxes as a result of combined reporting."

Mr. Mazerov's testimony said combined reporting states are "disproportionately among the most economically successful."

Representatives from the United Food and Commercial Workers told the committee that Wal-Mart was a chronic abuser of tax loopholes, often transferring its assets to an out-of-state or foreign holding company, then leasing the property back to the in-state stores. The rent paid to the holding company counts against the company's net revenue, and thus reduces its tax obligation.

House bill 1775 has been in the state House finance committee since last summer.

"Money Q&A" and "Company Town" are featured exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.