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End Special Subsidies to Lower Taxes for All
Taxpayers have spent millions on four different occasions to subsidize the infamous “Sony site” in Westmoreland County. In the 1970’s Volkswagen got $70 million in state aid under Gov. Milton Shapp. Under Gov. Bob Casey, Sony moved in with $40 million in taxpayer cash, and secured another $1 million under Gov. Rendell before moving out just two years later in 2007. Finally, in 2011 taxpayers gave $10 million to rehabilitate the site.
The Sony saga is hardly an anomaly. We’ve identified $706 million in “economic development” grant and tax credit programs from the 2013-14. This total doesn’t include independent agencies like the Commonwealth Financing Authority or borrowing for Redevelopment Assistance Capital Spending.
| Corporate Welfare Grant & Loan Programs | 2013-14 Budget (Thousands) |
| General and Special Funds | |
| Agricultural Research | $787 |
| Agricultural Promotion, Education and Exports | $196 |
| Ben Franklin Tech Development Authority Transfer | $14,500 |
| Commonwealth Financing Authority Transfer | $78,019 |
| Council on the Arts | $886 |
| Discovered in PA Developed in PA | $9,900 |
| Food and Marketing Research | $494 |
| Grants to the Arts | $8,179 |
| Hardwoods Research and Promotion | $350 |
| Industry Partnerships | $1,813 |
| Infrastructure and Facilities Improvement Grants | $19,409 |
| Keystone Communities | $11,300 |
| Keystone Works | $1,000 |
| Livestock Show | $177 |
| Marketing to Attract Business | $3,442 |
| Marketing to Attract Tourists | $7,435 |
| Municipalitites Financial Recovery Revolving Fund Transfer | $7,096 |
| New Choices/New Options | $500 |
| Open Dairy Show | $177 |
| Partnerships for Regional Economic Performance | $11,880 |
| Pennsylvania First | $37,800 |
| Pennsylvania Race Horse Development Fund | $301,225 |
| Tourism-Accredited Zoos | $550 |
| World Trade PA | $7,296 |
| Youth Shows | $140 |
| Total General and Special Funds | $524,551 |
| Targeted Tax Credits | |
| Film Tax Credit | $60,000 |
| Job Creation Tax Credit | $10,100 |
| Research and Development Tax Credit | $55,000 |
| Keystone Opportunity Zone | $21,800 |
| Keystone Innovation Zone | $25,000 |
| Alternative Energy Production Tax Credit | $10,000 |
| Total Targeted Tax Credits | $181,900 |
| Total Amount | $706,451 |
By eliminating these targeted incentives and instead creating tax relief for all businesses, Pennsylvania could lower the corporate tax rate by 2.91 percent, dropping the tax rate from 9.99 to 7.08 percent. That’s assuming a purely static model, not factoring in new businesses attracted with the lower rate.
Instead of having the second-highest corporate tax rate in the nation (and the highest flat rate), Pennsylvania would land in the middle of the pack with the 22nd highest ranking. That is, we would bypass 20 states that currently have lower corporate income taxes.
Other states are catching on to the failure of targeted tax incentives. According to the Tax Foundation, New Mexico recently passed a business tax rate reduction and reduced the number of special interest tax credits, with a Democratic legislature. Indiana is keeping corporate tax reductions on track and North Carolina cut their corporate tax, and repealed some selective credits.
As other states continue to reduce the barriers for business, Pennsylvania will become even more uncompetitive despite the billions spent to woo businesses each year.
For more on the failure of Pennsylvania’s corporate welfare spending see our Blueprint for a Prosperous Pennsylvania.