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Three New Tax Breaks Will Cost PA Schools and Services

7:31 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

private jet

Pennsylvania lawmakers are considering legislation that will give tax breaks to those who purchase private and corporate aircrafts

After making deep cuts to schools, early childhood education, and health and human services, Pennsylvania lawmakers are now considering new tax breaks that will largely benefit a small number of higher-income earners.

Last week, the Senate Finance Committee approved legislation that would create a new loophole in the state inheritance tax. It allows business owners to bequeath business assets tax-free to their heirs — an advantage unavailable to most hardworking Pennsylvanians who inherit a family home or car.

Over in the House, the Finance Committee voted 18-16 on Wednesday to approve a bill that would exempt sales tax on the purchase of private and corporate aircraft, jet parts, and aircraft maintenance and repair. A car or truck purchase will still be subject to sales tax, but those in the market for a private jet will get a tax break.

Finally, the House Commerce Committee is voting today on legislation that would reward investors in Pennsylvania start-up companies with a new tax credit that they can take even if they owe no state taxes. To qualify for the credit, the investor must have a net worth of $1 million or income above $200,000 a year.

Each bill, estimated to cost millions annually, could come up for votes before the House and Senate in the coming weeks. The Pennsylvania Budget and Policy Center has more on all three bills here.

These bills come on top of Governor Corbett’s proposal to enact a new round of tax cuts beginning in 2015 that will ultimately cost hundreds of millions from the state treasury and put profitable corporations first in line when future budgets are negotiated. It would be the latest in a series of costly special tax breaks over the decade that have undermined Pennsylvania’s ability to invest in schools and other vital services.

Pennsylvania can continue to fund special tax breaks like these or we can invest again in our children and our economic future — but increasingly we can’t do both. Unaccountable tax cuts undermine success in the classroom and growth in our communities, and they shift costs onto school districts, local governments, and property taxpayers.

Pennsylvania needs real tax reform that closes loopholes, ends special tax breaks, and levels the playing field for everyone. Only then can we enact a state budget that returns to tried-and-true investments in education and the services that promote long-term economic growth.

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‘How ’bout No, You Crazy Dutch….’

1:40 pm in Uncategorized by ThirdandState

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.

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Another PA Corporate Loophole – This Time for Jets

8:07 am in Uncategorized by ThirdandState

A blog post by Chris Lilienthal, originally published at Third and State.

Private Jet (photo: melodysk/flickr)

Private Jet (photo: melodysk/flickr)

If you buy a car, a truck, or any other vehicle in Pennsylvania, you pay sales tax. But if you are one of the wealthy few in the market for a Learjet or a Gulfstream aircraft, you will be able to purchase it tax free under a bill introduced in the state House of Representatives.

House Bill 1100 would exempt the sale of private and corporate aircraft from the state sales and use tax. At a time when average Pennsylvanians are bearing the brunt of cuts in education and other vital services, the bill effectively creates a $10 million to $14 million annual taxpayer subsidy for individuals who buy airplanes for recreational purposes and for corporations that upgrade jets for executives.

The Pennsylvania Budget and Policy Center recently released a policy brief on HB 1100. Here are the highlights:

● This bill is a subsidy to the wealthiest Pennsylvanians. Few middle-class families or small businesses would benefit from it.

● The jets sales tax exemption is a big money loser for the state. It would drain funding from investments that help create jobs and build a strong economy, including transportation, public safety, good public schools and a robust system of higher education.

● There is no accountability to taxpayers if new jobs and economic growth promised by the aircraft industry in exchange for this tax break are not realized. The exemption would have to create 6,500 new jobs, with an average salary of $50,000, just to pay for itself. This is more than double the number of people currently employed in Pennsylvania’s aircraft industry.

● Only two states fully exempt non-commercial aircraft from sales tax, and one of those states — Massachusetts — is trying to get rid of the tax break.

● Tax loopholes are costly and don’t create jobs. West Virginia enacted a sales tax exemption for airplane repairs to lure jobs to that state, but it hasn’t worked. Pennsylvania, without this tax break, has seven times as many aircraft repair and maintenance companies as West Virginia, employing more than twice as many people.

● This is a tax break that Pennsylvania cannot afford. Should lawmakers spend scarce resources on a tax break for wealthy individuals or for schools, higher education, health care and services for people who are vulnerable?

Read the full policy brief or our press release.