A big tax credit ‘WHY?’

A big tax credit ‘WHY?’

Why? Why are Pennsylvania taxpayers being forced – not asked, mind you — to subsidize the natural gas industry to the tune of nearly three-quarters of a billion dollars? And at a union premium, no less.

Gov. Tom Wolf, who apparently still wants to attempt to tax the struggling industry into oblivion with an extraction tax (on top of the existing “impact fee” tax), reportedly will sign tax credit legislation that will, as news accounts have it, “extend millions of dollars in tax breaks to turn natural gas into fertilizer and other chemicals.”

Beginning in 2024, the measure “authorizes 25 years of tax credits up to almost $26.7 million a year, to be divvied up among no more than four facilities that each can draw a maximum credit of just under $6.7 million. That totals almost $670 million,” the reports note.

Additionally, the facilities “must meet a capital investment requirement of $400 million and 800 jobs, including construction.”

And as one news report put it, “The bill is a particular achievement for unions, guaranteeing the facilities that get the tax credit pay union-scale wages for construction.”

This is so wrong on so many levels.

We long have supported the shale gas industry in Pennsylvania. The possibilities of its ancillary buildout in manufacturing are exciting. And we long have opposed the ecocrats’ repeated attempts to tax and regulate the industry out of existence in favor of heavily taxpayer-subsidized “green” energy that’s hardly as “green” as billed and hardly economically efficacious.

But neither have we been amenable to government efforts to use tax dollars to subsidize any business or industry. And make no mistake, tax “credits” are a taxpayer subsidy.

But to add insult to sound public policy injury, forcing the industry to pay an inflated wage at all, and as a condition of obtaining the tax break, is nothing less than public policy extortion.

Taxpayers should neither be forced to pay any company to create jobs nor be forced to pay tribute to organized labor.

The natural gas industry is struggling, indeed. The shale gas industry has been rocked back on its heels. From a mild winter in parts of the country, to the coronavirus pandemic, to a rapid growth model that proved to be unsustainable, the industry, say supporters, deserves all the help it can get.

But not at the expense of eschewing the clear signals the marketplace has been sending.

Natural gas prices reached an all-time low in June. The daily price of $1.38 per British Thermal Unit (BTU) on June 16 represents the lowest price in 20 years (according to Natural Gas Intelligence).

The news reports cite backers who say the commonwealth’s plentiful supply of “dry natural gas” can be turned into fertilizer, ammonia, diesel exhaust fluid and other chemical products “that are in demand in Pennsylvania and across the northeastern United States.”

Well, if there’s such a demand, why should taxpayers underwrite its extraction and/or conversion?

Are taxpayers not already on the hook to the tune of $1.6 billion for Shell’s Beaver County cracker plant, a facility that largely will be used to produce plastic pellets for myriad manufacturing applications?

Are taxpayers not far from Western Pennsylvania in neighboring Ohio also not on the hook for multiple millions of dollars in tax “credits” for a similar cracker facility a few score miles to the south? That facility, by the way, could be in jeopardy after a major backer/partner pulled out.

Again, taxpayers certainly have no business — none whatsoever and neither directly nor by “tax credit” proxy – being turned into venture capitalists to cover capital costs that private industry in pursuit of private profit alone should bear.

If these industries cannot secure traditional financing for such efforts, the marketplace is speaking loudly. Off-loading those costs onto the public – and striking an inflationary deal with the Progressive/Organized Labor Industrial Complex, to boot – should be beyond the pale.

Tragically, it is not. Taxpayers here, there and everywhere have been despoiled of a great deal of their wealth for decades by such deals. To help build the barons of sport playgrounds for multimillionaire owners and athletes. To help build convention centers that charge only limited or no rent at all. To help bankers – bankers! — build skyscrapers.

As we are sadly compelled to write, time and time again, the list goes on and on.

No doubt, government does have a role to play in economic development. But it’s not transferring private wealth to pick what it has decreed to be an economic “winner.”

Rather that role is to facilitate economic growth with the least amount of regulation and taxation for all. After all, it really is the function of the marketplace to pick those winners and losers – not the government.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).