PBPC Testifies Before House Finance Committee on Characteristics of Effective Tax Incentives

Download a PDF Version of Michael Wood's Testimony

In testimony before the House Finance Committee today on bills to create a series of new tax credit programs, PBPC Research Director Michael Wood explained that Pennsylvania has enacted billions of dollars in business tax reductions and spent hundreds of millions of dollars on tax credits, but there is little information available to determine whether these large tax expenditures have done what they promised to do. 

"Tax credits programs are a popular tool in the toolbox. However many have not earned their good reputation," he testified. "In Pennsylvania and across the nation, tax credit programs too often are poorly designed, lack clear goals, and fail to make good on promises. Often, the programs pay for activity that would have otherwise occurred.

"House Bills 2181 to 2184 propose a series of tax credits in an effort to add to the state’s economic incentive toolbox, and attract more investment. Portions of the bills may have merit, but as currently proposed, do not offer the Commonwealth the 'bang for the buck' necessary to warrant their enactment.

"It is important to note at the outset that the Commonwealth has made billions of dollars in business tax reductions, and enacted hundreds of millions of dollars of tax credits, in an effort to spur development. There is little information to judge whether these large tax expenditures have borne fruit. Before enacting new tax credit programs, the Commonwealth needs to determine whether the strategy has been at all effective."

Read Michael Wood's Full Testimony