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State wants jobs, but at what cost?

By   /   October 15, 2012  /   No Comments

By Melissa Daniels | PA Independent

HARRISBURG — Pennsylvania wants jobs, so much so that lawmakers are considering allowing employers to keep tax dollars.

But some fear the policy could be abused at the commonwealth’s expense.

The Promoting Employment across Pennsylvania proposal, which would allow participating employers to collect 95 percent of their new employees’ personal income tax dollars, passed the House of Representatives on Monday in 142 to 55 vote.

BENNINGHOFF: Sponsoring legislation that would let employers recoup personal income taxes as an economic development incentive.

State Rep. Kerry Benninghoff, R-Centre, the primary sponsor, has promoted the bill as a boon for job creation.

He said the commonwealth will benefit from dollars that it otherwise wouldn’t see, and unemployed residents would get good-paying jobs. He cited a similar proposal in Kansas that’s created upwards of 10,000 jobs.

“The bottom line is, taxpayers don’t have to put a single dime out for this program as many other job-creation programs have done,” he said.

House Majority Leader Rep. Mike Turzai, R-Allegheny, called the proposal an “innovate approach” designed to promote private-sector job growth.

But not all were satisfied with what the bill could for economic development. State Rep. Phyllis Mundy, D-Luzerne, said she was concerned the bill failed to clearly define new jobs.

“Tax credits need to be for hiring Pennsylvania workers in a new employment opportunity, not moving jobs from one business to another, and I’m concerned that the language in the bill today does not adequately address that goal,” she said.

DELUCA: Voted against proposed personal income tax business incentive.

State Rep.Anthony DeLuca, D-Allegheny, said he was not going to support the bill because it unfairly pits new or relocating businesses against existing companies, including those that have taken nothing from the government.

“We have done nothing for the hardworking business people out there who continue the struggle and yet we’re going to try to give this tax break to companies that come in and compete with other companies with the same venue,” DeLuca said. “I find that wrong, Mr. Speaker.”

Several lawmakers also expressed concern the bill would harm the commonwealth’s tax collection, giving money to employers that could other fund vital services. A fiscal analysis of the bill says the impact on state finances is unknown, as it depends on how many companies take part.

There’s no cap on how many companies can enroll in PEP, as the legislation stands.

There is a rule that will keep businesses who enter the program will not be eligible for other job-creation tax credits, per the legislation. But they could still be eligible for other breaks, like those that exempt from property taxes.

Similar proposals in other states have successfully diverted funds, but not all agree that it was in the best interests of job creation. Greg LeRoy, executive director of Good Jobs First, a D.C.-based research group, helped author a study identifying 22 personal income tax-based programs in 16 states. Together, those programs totaled about in $684 million in annual diverted tax revenue.

But LeRoy said these programs cross the line, as there’s a fairness factor to the employees, who are expecting their money to go to Harrisburg. The potential also exists for companies to hop state lines without truly creating new jobs, he said.

“Pennsylvania has a lot of metro economies that straddle one of its borders,” LeRoy said. “Companies can move very short distances in Pennsylvania, employ the same workforce and start pocketing income taxes with creating jobs without hiring Pennsylvanians.”

Benninghoff said he did not agree with the concern that businesses would benefit from the program by simply recasting their company as new. The legislation is modeled to ensure fairness and prevent abuses, he said.

If the company fails to meet the terms of the arrangement, it would be required to re-pay the commonwealth the amount of withholdings retained. Any participating business requires approval from the Department of Community and Economic Development, Benninghoff said.

Benninghoff said Senate lawmakers would consider the bill in committee meetings this week.

“I hope it makes us more attractive than maybe a lot of other neighboring states,” he said. “My goal is to be able to relieve concerns for people who can’t find family sustaining wages.”

Contact Melissa Daniels at [email protected]


Melissa formerly served as staff reporter for Watchdog.org.