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.