Tax Credits

'How 'bout No, You Crazy Dutch....'

By Mark Price, Third and State

The Only Proper Villian We Could Find From the NetherlandsOn Monday night, the Lower Allen Township commissioners in Cumberland County considered a proposal from Ahold USA, the corporate parent of Giant Food Stores, for a $400,000 property tax abatement on a meat repackaging plant on which the company has already broken ground. (Ahold USA is itself the subsidiary of the Netherlands-based Ahold.)

The company has neglected a basic principle of the economic development game through which companies extract subsidies and tax breaks from states and localities where they were going to build anyway: until you have the subsidy in hand, don't give away that it will not impact your location decision.

But since the company made this error, the title of this blog post, taken from the Austin Powers movie Goldmember, should suffice for the township's answer. (It is pure coincidence that Goldmember, a Dutchman pictured to the right, has a gold G on his velvet sweatsuit.)

Here are two stories on this issue.

The Lower Allen commissioners should continue to say no to Ahold's request because it is a simple giveaway that diverts needed tax revenue from the township. It would be that much costlier if the West Shore School District (which has absorbed $2.2 million in state budget cuts since 2010-11) and Cumberland County (where property taxes for most homeowners and businesses may rise by 22% next year) follow suit.

The repackaging plant will consolidate meat cutting operations for Ahold USA's stores in the mid-Atlantic region. Customers will no longer get their meat freshly cut in the store, instead, the meat cutting and packaging function is being moved to a central location with easy access to the interstate. Some meat cutters will lose their jobs in the process, while others might be offered jobs at the new facility, at a lower wage.

For its $400,000, Lower Allen Township is being promised between 450 and 800 jobs; there is no word on how many jobs will be lost at Giant Food Stores in the region or at the company's Maryland division.   

Normally, a corporate giant like Ahold will approach government officials to inform them they are on the short list for a new facility being planned. Just look at how the Shell Corporation enticed incentive offers from Ohio and West Virginia before securing the mother lode of all incentives from Pennsylvania (a $1.67 billion, 25-year tax break).

Unfortunately for Ahold USA, the company has already broken ground on the meat repackaging plant. So the township commissioners made the right move by putting the request on hold. Why divert scarce tax dollars to a profitable corporation to do something they are already doing anyway?

While they make good beer in the Netherlands, Ahold corporate honchos could learn a thing or two about economic development blackmail from Dick Yuengling Jr., the owner and president of D.G. Yuengling & Son’s.

Although the company recently expanded distribution in Ohio, making Western Pennsylvania an economically attractive location to expand production, the brewing scion doubts he would build a new brewery in Pennsylvania. Yuengling wasn't specific about what he means by business climate, but it is pretty clear from a Patriot-News interview that he doesn't think Pennsylvania as a rule offers enough taxpayer cash to corporations. (Although, Yuengling says his decision of where to build will not be based on the incentives offered.)

The decision comes down to taxes, incentives and the state’s business climate, Yuengling said. 

In the interview, Yuengling hinted that there are far more business-friendly states. And while he didn’t directly criticize any Pennsylvania administration, past or present, he said he can never be certain which way the state is leaning in terms of its tax and business policies. 

By contrast, he said enticing incentives offered by other states might be too good to pass up. However, he declined to cite any states he might be considering for the brewery... 

“We don’t necessarily base business decisions on incentives like that. But if they are going to give them to somebody, we would stand there and take them.” 

Educational Tax Credits Are Often a Bait-and-Switch

By Stephen Herzenberg, Third and State

A story in Monday's New York Times explores the use of state tax credit programs to pay for "scholarships" for students who attend private schools. The story suggests that many of the students who receive such scholarships already attend private school and are not low-income.

To the extent that this is true, the political marketing of these programs as alternatives (for a select few students) to public schools in distressed communities is a "bait and switch." Educational tax credits actually siphon taxpayer dollars to subsidize private schools, reducing state revenues available for public schools.

Is this how the scholarships to attend private schools work under Pennsylvania's Educational Improvement Tax Credit (EITC) program?

Probably: there is no prohibition on EITC scholarships going to students already attending private schools; middle-class families are eligible to receive scholarships (the income limit for a family of four is $84,000); and there is no evidence that even this income limit is enforced. In fact, Pennsylvania's Act 46 of 2005 prohibits the state from requesting from scholarship organizations any information other than the number and amount of scholarships that they give out. I guess we're just supposed to trust the scholarship organizations to self-enforce the income limit.

GOODE Economic Investment Legislation Approved

City Councilman At-Large W. Wilson Goode, Jr.’s Economic Investment Package was approved by the Council’s Committee on Commerce and Economic Development. The third-term councilman, and chair of the committee, has introduced more than 50 bills to become law.

The New Philadelphia Job Creation Tax Credit Ordinance amends the program under which a credit against the City's business privilege taxes will be given to businesses that create new jobs within the City of Philadelphia. The businesses will receive a $3000 credit for each new job created for tax years 2010 and 2011.

The New Economic Partnership Ordinance amends the program providing a credit for contributions to community development corporations (CDCs) to allow two businesses to apply jointly for the credit.

The DCED Main Street Funding Ordinance authorizes the Commerce Director to file
an application with the Commonwealth's Department of Community and Economic

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