It appears that Pennsylvania will have its budget passed on time without any tax increases for the second consecutive year. The Governor and lawmakers agreed on a spending framework and are now negotiating specific line items.
As a part of a budget deal, some Democratic and Republican policymakers are advocating for a plan set to award Shell Oil a prolonged tax credit in exchange for the construction of a natural gas cracker plant in Western Pennsylvania. Proponents argue that the Shell Plant will bolster the state economy by creating thousands of jobs. However, in reality, Pennsylvania has a long history with targeted tax credits and little to show for it.
The proposal creates a special tax credit that would allow Shell Oil an annual $66 million tax break over 25 years equating to a grand total of $1.65 billion. Undoubtedly, the targeted tax break would benefit Shell and entice them to set up shop in Pennsylvania. However, such a credit does not better the commonwealth’s overall business climate for the many thousands of employers and entrepreneurs already established in Pennsylvania.
The Shell deal is just the latest example of the more than $750 million in economic development spending that Pennsylvania currently hands out to corporations through either subsidies or tax credits. Despite corporate welfare spending, second only to Ohio, Pennsylvania’s job growth has been sluggish for more than a decade.
While state government is eager to offer incentives for select companies and industries in the name of job creation, the commonwealth’s business climate continually ranks amongst the worst in the nation. Pennsylvania’s corporate income tax of ten percent is the highest among the 50 states. The overall tax burdens for new and mature businesses are also the most onerous in the nation.
Corporate welfare programs, chosen by politicians, are major roadblocks to real economic growth in the Commonwealth. The money spent or revenue lost through tax breaks for select companies prevent tax rate reductions that would benefit business in all sectors. A more friendly corporate tax structure would not only entice businesses to move to Pennsylvania, but also allow those existing in the state to expand their operations. A budget deal needs to reevaluate the hundreds of millions appropriated for “economic development” and incorporate pro-growth tax reform.