Published in the Concerned Center City Citizens Review, October 2016
By Joseph Batory
In recent years, Pennsylvania’s Republican majority legislature, with its fiscal head in the sand, has refused to deal with the reality that the State needs more revenue in order to pay for the services it provides —State government continues to run with an annual budget deficit which by the way is unconstitutional. At least one credit rating agency reportedly believes the State’s recently signed $31.5 billion budget is still “structurally imbalanced” and that many of its “revenue assumptions could prove optimistic” at best.
Each year, Harrisburg politicians applaud themselves for the mishmash of “shaky” new revenue which avoids raising the personal income tax. But this has been a clever political distraction. That’s because these legislative “champions of the common people” conveniently have left out any information about the State’s incestuous corporate relationships.
In a blatant example of corporate welfare, Shell Chemical Appalachia, a division of one of the world’s biggest energy companies, is getting a huge tax break which might have otherwise provided desperately needed new revenue for Pennsylvania. To entice the company to build in Pennsylvania, the Corbett administration and the legislature in 2011 approved $1.7 billion in tax credits over 15 years — the largest tax forgiveness in Pennsylvania history.
This is not to question the practicality of the State using corporate tax breaks to lure business to Pennsylvania. But the gargantuan size of this one, a multi-year $1.7 billion corporate tax break, appears to be beyond excessive, especially in a State where new revenue is sorely needed. This gigantic tax break is being gifted to the second largest company on the planet. Shell’s parent company had $20 billion in profits in 2010 (the year before Corbett and friends cut the deal), up 60 percent from the year before.
It should be noted that Corbett, who received over $1 million in campaign donations from the oil and gas industry, railroaded this agreement with a “hot air promise” of 20,000 new Pennsylvania jobs. The reality is about 2000 “temporary” construction jobs were needed to build the plant but then 400-600 permanent employees will run the plant.
Additionally, as the State’s structural deficit hovers in the billions of dollars, these same legislative Republicans continue to reject a reasonable extraction tax on Pennsylvania’s natural gas. Every other major gas producing state has a severance tax. Severance tax bills have been introduced in Harrisburg every year since 2009, but gas drillers have successfully fought the tax, spending $46.8 million on lobbying since 2007. Pennsylvania’s Independent Fiscal Office has projected that a shale gas severance tax could bring in large amounts of revenue — as much as $1.86 billion per year by 2020 — while the gas industry in Pennsylvania would continue its growth without any significant loss of revenue or any need to abandon their profits and leave Pennsylvania.
The reality is that Pennsylvania’s 2016-2017 budget is only balanced with an array of “smoke and mirror” revenue sources. It remains to be seen whether or not State expenditures will once again exceed revenues in this fiscal year. In this context, how could Pennsylvania government have given away this multi-year $1.7 billion tax break to an exceedingly wealthy corporation? And why is Pennsylvania the only State without a severance tax on natural gas extraction?
This is not responsible government.