In brief public comments yesterday, both Pennsylvania Gov. Tom Corbett and Lt. Gov. Jim Cawley supported and defended a plan to grant Shell a 25-year, $1.7 billion tax forgiveness plan if they will build and operate an ethane cracker plant in the state. For those new to the issue, ethane is one of the chemicals that comes out of the ground from natural gas drilling. Ethane can be “cracked” or converted in ethylene, a raw material used to make plastics.
The plant that Shell proposes to build will generate some 20,000 jobs and create an economic impact of $17-$20 billion. Investing $1.7 billion to get $17-$20 billion is a no-brainer.
“My whole goal is to grow good, sustaining jobs for the people of Pennsylvania, not just today but for decades to come,” Corbett said in his first public comments about the tax proposal during an appearance on a Harrisburg talk radio show today.*
Cawley, too, backed the job-creation potential of the plant. When asked about the size of the tax breaks at an unrelated news conference in the Capitol, Cawley said "Obviously the administration is committed to creating job opportunities in Pennsylvania. "
He called the deal a "wonderful way to partner with the private sector," but at the same time cautioned that while signals from Shell were good, the deal has not yet been inked.
The tax credit will be "limited to 20 percent of the taxpayers’ qualified Pennsylvania tax liabilities," he added; the total maximum credits under the program would be $66 million in a year.*
Cawley is right. West Virginia and Ohio will do everything they can to encourage Shell to reconsider it’s decision to build the plant in Pennsylvania. The deal is not yet finalized, and the deal to grant Shell tax relief will go a long way toward sealing the deal.
The tax break would not begin until the plant opens, which would be 2017 at the earliest. So it’s not taking any precious money away from PA’s social programs in the meantime. And when the plant does finally open, the new tax revenue that will accrue to the state from tens of thousands of new jobs will more than make up for the break being offered. But of course that doesn’t compute for economic illiterates who can’t seem to get their heads around the concept that a 10x return on money is a good deal.
*Philadelphia Inquirer (Jun 5, 2012) – Corbett, Cawley defend $1.7 b tax break for Shell Oil