Slow Down the Shell Tax Giveaway Train

The Governor’s plan to offer tax credits totaling $1.65 billion to plants, including the proposed Shell ethane using facility, needs to take a breath in its headlong charge toward passage in the Legislature. There are several important questions that need to be answered.

First, why would tax credits be given to a plant likely to be located in a tax free Keystone Opportunity Zone? Under the provisions of the amended Opportunity Zone law, no state taxes or property taxes will be owed for up to 15 years of operation. And if other eligible ethane using plants come, will they insist on having a Keystone Opportunity zone designation at their chosen site?

Second, how can anyone be sure that the optimistic job creation numbers will ever happen? We have seen too many instances where large taxpayer subsidies given to companies have failed to produce anything close to the projected numbers-or where the development failed to last very long such as Volkswagen and the Kvaerner shipyard, or Lazarus or Lord and Taylor.

If other states, such as Ohio or West Virginia, are willing to give the store away to get the Shell plant, why not let them? Pennsylvania has the gas. We could slap a significant severance tax on any gas leaving the state and going to an out of state chemical plant. That might produce enough revenue to allow major cuts in the state’s outrageously high corporate income tax, one of the biggest deterrents to companies locating in the Commonwealth. Making Pennsylvania more business friendly through lower taxes for all companies is far preferable to making the state tax free for some companies. And we still have the drilling related jobs, the royalty and lease payments. Let another state worry about the inevitable environmental lawsuits.

Moreover, what will existing petrochemical or pharmaceutical plants already in the state think about the enormous tax breaks being offered to some newcomers? Will they demand tax breaks as well? Where does it end?

The present effort is not infrastructure enhancing and is not business climate improving. It merely adds to the perception that Pennsylvania is driven by special interests and favored companies. This is the price the state pays for being unwilling to enact Right to Work, repeal the prevailing wage law and adopt a more reasonable regulatory environment.

Opportunity zone tax incentives for blighted and costly-to-rejuvenate areas saddled with toxic waste, rusted out hulks of unusable equipment and buildings are one thing. Tax credits on top of those benefits make no economic sense.

Tax Credits for Education on the Block

In an effort to balance the State’s $3.2 billion budget deficit, the Legislature is looking to cut funding for Pennsylvania’s Education Improvement Tax Credit Program (EITC). The EITC gives businesses a tax credit for 75 to 90 percent of donations to school foundations, preschool programs, and scholarship programs. The EITC provides about $45 million annually for private and parochial school scholarships as well as another $22 million for public school programs. While the amounts of the proposed cuts to the EITC program are not yet known, it is part of a larger Senate budget plan to slash 18 tax-credit programs from $400 million to $150 million.

The EITC program helps low-income people more easily afford private and parochial schools. It is as close to a school choice program as Pennsylvania residents can get. And now the strides that have been made in this area are being threatened in this budget battle. No mention is made of asking public sector union employees, particularly teachers, of foregoing scheduled raises or of holding the public districts’ basic education funding levels constant-moves with the potential for great savings in this economic environment. The Governor has gone to great lengths to protect the public education system and their massive subsidies while private education donation tax credits gets put on the chopping block.

Strengthening the education system in the Commonwealth will only begin when public education is met with strenuous competition. In absence of a pure voucher system, the EITC program has offered the only hope in this regard.