Sunday, December 28, 2014

Is PA income tax break a gift to favored employers? UPDATE

Oracle cited in paycheck-diversion deal

Is PA income tax break a gift to favored employers? UPDATE

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

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

The bill is sponsored by State Rep. Kerry Benninghoff, R-Centre, who represents a district up around Penn State. He didn't call me back last week or yesterday to talk about his bill, which is co-sponsored by eight suburban Philadelphia Republicans, among others. 

But word on the State House floor is that Benninghoff's bill was being drafted in time to land a specific project. 
“My concern is that the House is not aware that we are fastracking legislation" to benefit companies that are already profitable, state Rep. Greg Vitali, D-Delaware, told my colleague Amy Worden.

UPDATED: Which project? General Assembly rumors said Oracle, the business-software giant, plans a center in Benninghoff's State College area district, and the tax break is a sweetener. A tax-break opponent insisted to me that the actual beneficiary is Oracal, a Georgia-based vinyl advertising company. Vitali wasn't sure which. Benninghoff in a cryptic e-mail told me his was "not an Oracle bill." But another prominent Republican told me he was "99.9% sure" the bill benefits Oracle, not Oracal.

If the state is giving Oracle a tax break, I wonder how Oracle's archrival will take the news? Newtown Square-based SAP America employs 2,500 engineers, salespeople and corporate staff in Pennsylvania without the new tax break. Why should Pennsylvania reward SAP's competitor?  SAP had no immediate comment. Oracle and Oracal didn't call back.

EARLIER: The Senate version of the law, as amended yesterday, would cap benefits to any one employer at $5 million a year, and require at least 250 hires to qualify, an improvement over the sky's-the-limit House original, but still a "huge new loophole," Christopher Lilienthal, spokesman for the liberal Keystone Research Center, told me.

Most voters understand companies are more likely to hire in places where taxes, services and the general hassle factor are attractive to business.

But what kind of a signal is our legislature sending to existing employers  if their competitors are given tax breaks that they can't share?

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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