PA tries to buy new Oracle offices with employees' money

PA tries to buy new Oracle offices with employees' money

Summary: Tax incentive pays companies to bring workers to the state

TOPICS: Government, Oracle

Tax incentives to get companies to build new facilities or open large offices are a usual part of the way that localities try to attract investment. Generally, these incentives appear in the omr of tax abatements or even complete immunity from some form of taxation for a fixed period of time. But Pennsylvania is on the verge of joining 15 other states in offering a tax plan where the employees pay the employer to do business in their state.

It’s not as egregious as it sounds; the incentive plan, which passed through the PA legislature with bi-partisan support, gives the employers 95% of the money that their employees pay as Pennsylvania State income tax (currently 3.07% of their taxable income). The total amount is capped at $5,000,000 annually and would end in 2018.

Oraclke already takes advantage of a similar program in New Jersey and PA is hoping to cash in on Oracles planned expansion by drawing them to a site in the Penn state region, which they hope, in turn, would bring other high-tech employers attracted by the tax incentives and loal pool of educated employees.

The program isn’yt limited to Oracle; any new employer could take advantage of the tax incentive as long as they meet the requirements iof the program, which inclue paying a high wage than the local average and hire no fewer than 250 new employees over 5 years.

Critics point out that oracle’s largest competitor, SAP, who already employees 2500 people at their PA headquarters, would be receiving no such tax breaks.  The bill, which was passed over a week ago, is still sitting on the desk of Governor Tom Corbett. His office has been quoted as saying that the bill is “under review.”  The bill would become law immediately after being signed by the governor.

Topics: Government, Oracle

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  • Race to the bottom

    A terrible precedent has been set (or was set a long time ago) when states began competing with other states and attempting to poach their businesses by offering such tax incentives. As the corporate tax rate shoots towards zero, it is ordinary residents who will make up the shortfall, whether through increases in taxes, fees, or elimination of services. This trend is already apparent over the past several decades, nationally as the share of taxes paid by corporations has gradually decreased and the share of taxes paid by individuals has increased.
  • It's A Tough Game

    Economic Development is a tough, dirty game. SAP has a way to get its own incentive - just threaten to move.

    If taxing, regulatory, and incentive authorities are behaving a certain way, it is up to firms to be nimble enough to respond accordingly. On the one hand, this bill is a great idea because it encourages firms to hire more folks and pay them more. On the other, since the incentive winds down in several years, there should be some escrow or other disincentive to leave afterwards.