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June 20, 2012 | By | Posted in Governor

Big government, big business, big labor back $1.65B tax credit for big oil

By Eric Boehm | PA Independent

Gov. Tom Corbett and allies from labor groups, business associations and state and local government make the case Wednesday at the statehouse for a $1.65 billion tax break for Shell to locate a plant in western Pennsylvania.

HARRISBURG — Business groups, union leaders and representatives of state and local government threw their support behind a plan to provide Shell Oil with a $1.65 billion tax credit as part of the state budget agreement.

Gov. Tom Corbett assembled this coalition Wednesday at the state capitol as part of an ongoing effort by the administration to land an ethane cracker plant in Washington County. The plant would use natural gas to produce petrochemical products and could create 20,000 jobs.

The Keystone State is battling with Ohio and West Virginia to land the facility.

The unity displayed by groups that normally oppose each other in state politics was important, said Corbett.

Even across party lines, even across the lines of labor and business, we all understand that this is an opportunity for the future of our state,” Corbett said. “And it’s not an opportunity that comes along very often.”

A crucial piece of the puzzle is the passage of a special tax credit for ethane, which would be capped at $66 million annually and could give Shell a $1.65 billion tax break over 25 years.

Pennsylvania’s corporate income tax is 9.99 percent, the highest in the nation. Combined with the United States’ corporate income tax, Pennsylvania has the highest taxes on businesses in the world.

Gene Barr, president of business advocates Pennsylvania Chamber of Business and Industry, said the tax break would balance out those economic hurdles, and he encouraged the deal to be part of an overhaul of Pennsylvania’s business climate.

We need to move forward, because we’re going to make products that this country and this world need, and we’re going to create careers for our people here in Pennsylvania,” Barr said.

John DeFazio, director of the United Steelworkers District 10, a sector of the largest manufacturing union in North America, said the ethane plant might be “the opportunity of 10 lifetimes” that Pennsylvania could not pass up.

But not everyone is on board with Corbett’s tax break proposal.

Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a liberal think tank here, said lawmakers should question a tax break to the world’s second largest company.

“Shell’s parent company had $20 billion in profit in 2010, up 60 percent from the year before,” she said. “The question for lawmakers should be why is Pennsylvania providing any subsidy to this project at all?”

Corbett and others defended the tax credit as being for more than just one company, and ensured that the legislation would not allow for any tax breaks unless jobs were created and other production benchmarks were hit.

We’re not giving anything away,” said Allegheny County Executive Rich Fitzgerald . “It’s almost like hiring a sales representative and paying them only on commission on the sales they make, not giving them the money up front.”

The tax credits would not start until 2017, so this year’s budget would not be affected, Corbett said.

Asked if low taxes for all companies would be better rather than tax breaks for a single corporation, Corbett said those other companies were not coming into the state.

If other large companies came to the state looking for similar arrangements to provide thousands of jobs, he would consider it and the General Assembly should as well.

That’s not a Republican or Democratic goal. It’s good policy; it’s good politics,” he said.

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Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com or at (717) 350-0963.

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