PhillyDeals: Proposed Pennsylvania tax benefit aimed at just one company

School District headquarters. Moody's may cut the district's bond rating below Ba1.
School District headquarters. Moody's may cut the district's bond rating below Ba1. (BOB LARAMIE / File)
Posted: October 19, 2012

What if the state income tax clipped from your paycheck were delivered not to your elected government for roads and other basic services, but to your out-of-state employer, to keep?

A proposal to allow that - for companies that plan to move to Pennsylvania to hire workers - is advancing toward Gov. Corbett's signature.

The bill is sponsored by State Rep. Kerry Benninghoff (R., Centre)  . He didn't call back last week or Wednesday to talk about his bill, which is cosponsored by seven Republicans from the Pennsylvania suburbs, among others.

But word on the House floor was that Benninghoff's bill was being drafted with an eye toward landing a specific project, a facility for Georgia's Oracal USA, which makes vinyl shrink-wraps for bus advertising, among other things, for central Pennsylvania, State Rep. Greg Vitali (D., Delaware)   told my colleague Amy Worden. (Oracal officials were unavailable for comment.)

"My concern is that the House is not aware that we are fast-tracking legislation," Vitali said, to benefit select companies that may already be profitable.

The Senate's version of the law, as amended Wednesday, would cap benefits to any one employer at $5 million a year and require at least 250 hires to qualify, an improvement over the original sky's-the-limit legislation in the House.

Christopher Lilienthal, spokesman for the liberal Pennsylvania Budget and Policy Center, described the Senate deal as still "a huge loophole."

Most voters understand that companies are more likely to hire in places where taxes, services, and a low general hassle factor make them attractive to business.

But in Pennsylvania, we impose relatively high taxes, then allow our lawmakers to carve out exceptions in special cases.

What signal is our legislature sending to existing employers if their competitors are given tax breaks they can't share?

Like Romney said

Paul Harrington, who heads Drexel University's Center for Labor Markets and Policy in Philadelphia, says he has been fielding inquiries from news media fact-checkers and other truth-seekers to make sure Republican presidential candidate Mitt Romney was right in Tuesday's debate when he said more than half of recent college graduates are unemployed or employed in careers that do not require a college degree.

Harrington reported those findings, from Census Bureau data, in a report published in cooperation with Northeastern University and the liberal-leaning Economic Policy Institute.

Young Americans unable to find high-paid work are moving "to Plan B," Harrington told me. "They mix work and school. Or they trade unemployment for underemployment." Sometimes that means taking jobs from high school graduates and teenagers.

No sign of easing this year?

"It hasn't improved at all, with the exception of information technology and engineering," Harrington said. Even nursing and health-care hiring for entry-level grads is weak. Retailers are eagerly recruiting among college seniors.

So we're now in the Apple store economy? "Yeah," Harrington said.

Sub-junk

As the Philadelphia School District prepares to borrow $300 million from investors to cover its next two years of budget deficits, Moody's Investors Service has threatened to cut the district bond rating below the current Ba1 level, which is already "junk bond" status. That's below the level at which insurers and other conservative investors tend to buy tax-free city bonds. The district owes $3 billion on previously issued bonds.

The agency gave the planned new bonds a higher Aa3 rating, thanks to the state Lease Revenue Intercept Program, which promises to redirect state taxpayer aid to pay investors, instead of school expenses, if the district looks like it may default.

Moody's analyst Geordie Thompson blamed the city schools' "weak financial position [on] increasing expenditures related to charter school growth."

He said also to blame were: Fixed spending related to government mandates and personnel costs, City Council's reluctance to boost property taxes, high current debt, money-losing interest-rate "swaps," which were supposed to protect against rising interest rates but have cost millions as interest rates fell, and high unemployment.


Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or follow @PhillyJoeD on Twitter.

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