Morning Must Reads: Business Subsidies and Corporate Tax Loopholes

Recently, Sarah Stecker of New Jersey Policy Perspective noted that Goya Foods will receive $80 million from the State of New Jersey to create nine new jobs.

I immediately thought of the Goya deal when I read Joseph DiStefano's column in The Philadelphia Inquirer this morning.

According to DiStefano, Pennsylvania gave Teva Pharmaceuticals $2.5 million to build a warehouse in Philadelphia that is projected to employee 500 people. Teva Pharmaceuticals over the last several quarters has reported $1.2 BILLION in profits. 

At least the Teva deal wasn’t as bad as the Goya deal, but on the other hand the states are engaged in a race. And it is that race that should scare you.

While recounting the details of the Teva deal, DiStefano relays a conversation he had with Pennsylvania Governor Tom Corbett about another promised state subsidy of $11.5 million for the financial services firm Janney Montgomery Scott.

I told Touhey what Pennsylvania Gov. Tom Corbett answered earlier this month when I asked why he promised brokerage Janney Montgomery Scott $11.5 million for moving its headquarters across Market Street: 'That's what makes this country great: We're not afraid to compete,' Corbett told me.

As Governor, Corbett says he's supposed 'to do one thing: grow jobs, jobs, jobs.' If states didn't compete by cutting deals, 'we'd grow fat and lazy.' By giving away cash, 'we are making Pennsylvania a business-friendly state.'

So there you have it. Based on the business subsidy that Goya Foods got from New Jersey, you the Pennsylvania taxpayer are fat and lazy! You know what this means? It's time shape up and lay off a lot more teachers, so we can give bags of cash to profitable companies to create a couple of jobs.

Taxpayer subsidies targeted at individual businesses do not alter the pace of job growth. They do, however, redistribute taxpayer dollars upward to wealthy business interests. They also reduce the resources available to finance critical public services like education, which can in the long run undermine our actual competitiveness as a state.

Speaking of robbing the taxpayer blind, the Pittsburgh Post-Gazette reports that the Pennsylvania Department of Revenue has concluded that the $10 million in realty transfer taxes that would normally be due on the sale of a building worth $250 million were avoided in a perfectly legal manner by the New York-based real estate investment firm that bought the U.S. Steel Tower.

Mr. Uziel said he learned from Dale Lesperance, manager of the Department of Revenue's realty transfer tax division, during a state recorder of deeds association meeting in Harrisburg last month that the sale had been deemed an '89-11' transaction.

In such transfers, the buyer, instead of purchasing the property itself, will acquire 89 percent of the interest in the company that owns it. After three years, the buyer will purchase the other 11 percent.

Under law, such deals are considered property sales subject to the tax only if 90 percent or more of the ownership interest is transferred within three years.

To sum up, we are laying off thousands of teachers, while at the same time giving away millions through corporate tax loopholes and business subsidies. I wouldn't really call that shared sacrifice.

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