PA state Sen. Yudichak: ‘Use smart tax policies to leverage job growth’

Credit: Sen. Yudichak

Pennsylvania legislators are using what state Sen. John Yudichak (I-Luzerne) calls smart tax policies to lure privately held companies with massive construction projects requiring manufacturing and other skilled trade jobs to the Commonwealth.

This recipe for success, said the senator, is spurring job growth in his district and others, and will help reduce poverty and crime while improving the local economies across communities. 

“These tax credits help the private sector drive job growth and private equity investment — and they help get government out of the way,” said Yudichak during the Nov. 22 Monthly Business Briefing hosted by the Pennsylvania Chamber of Business and Industry (PA Chamber) and the Pennsylvania Manufacturers’ Association (PMA).

Yudichak, chairman of the state Senate Community, Economic and Recreational Development Committee, joined PMA President and CEO David Taylor, as well as Gene Barr, the outgoing president and CEO of the PA Chamber, to discuss the positive impacts from newly signed laws that will help bring some of North America’s largest development projects to Pennsylvania.

Two tax-incentive laws signed into law last year and this year by Gov. Tom Wolf essentially stemmed from a 2012 deal that Pennsylvania structured with the Shell Oil Co.

Shell owns and operates the Shell Pennsylvania Petrochemicals Complex, an under-construction ethylene cracker plant in Potter Township, Pa., that’s expected to open in 2022. Under the deal, Shell is set to invest at least $1 billion in the state and create at least 2,500 construction jobs in exchange for a 25-year tax incentive of $66 million per year that is also tied to production. 

The deal reduces Shell’s tax by up to 20 percent and the combined incentive could reach $1.65 billion, becoming one of the largest tax incentives in Pennsylvania’s history, Yudichak said.

Because the deal “worked so beautifully,” the senator said that the state needed a tax credit specific to northeastern Pennsylvania — where his district of Luzerne County is located — to also get it into the petro-chemical market. 

“We wanted to replicate that success, particularly in the manufacturing sector, which in many cases… has been left behind,” the senator said during yesterday’s briefing. “So we went to work on Act 66.”

Pennsylvania Act 66 of 2020 established the Local Resource Manufacturing Tax Credit, which requires a company to invest $400 million in the construction of a new manufacturing facility, create 800 jobs, pay prevailing wages, and use carbon capture and sequestration technology “when economically feasible.”

In return, each plant (up to four) will get a maximum of $6.6 million in tax breaks each year for up to 25 years. And beginning in 2024, eligible companies also can buy dry natural gas at a tax credit of 47 cents per unit. Tax credits for the program are capped at roughly $26.6 million annually under the law.

“That new tax credit immediately got the attention of the private sector,” Yudichak said, “and Act 66 has been one of the great success stories in putting on the table reasonable and smart tax policies.”

In fact, he said, such policies mean that along the Interstate 80/81 corridor — going from Hazleton to Wilkes-Barre to Scranton — there is now the opportunity to create about 25,000 new jobs over the next decade.

That wouldn’t happen without smart tax policies like Act 66, Yudichak said, which already has attracted Houston-based fuel company Nacero Inc., to the area.

Nacero has inked a deal to build a $6 billion manufacturing plant on the site of a former coal mine in Newport Township and Nanticoke, bringing 3,500 construction jobs and 450 permanent jobs to northeastern Pennsylvania.

“Nacero’s decision to invest $6 billion and create nearly 4,000 new jobs represents the single largest economic development investment in the history of Luzerne County,” said Yudichak, noting that the facility is expected to produce 64,000 barrels per day of Nacero’s zero-sulphur low-carbon gasoline made from renewable and natural renewable gasoline.

The senator added that Nacero’s investment will have a regional impact of $25 billion and “will give northeastern Pennsylvania a fighting chance to transform its economy.”

“Smart tax policies leverage job growth and put the sign out that companies’ capital is welcomed in Pennsylvania,” said Yudichak.

Likewise, the success thus far of Act 66 also recently spurred the General Assembly to earlier this summer pass a sales and use tax exemption for computer data center development. Gov. Wolf in July signed a state budget bill into law that includes the exemption in what’s known as Act 25 of 2021.

The bipartisan law sets Pennsylvania tax policy on a course to encourage billions of dollars in private investment that will unleash the creation of thousands of new jobs at data centers across the Commonwealth, said Yudichak, and it signals to investors that Pennsylvania is ready to do more to attract technology investment.

He said the law took a broad coalition of statewide building trade unions, tech industry leaders and a bipartisan group of legislators to secure the sales tax exemption and since the bill became law, two new data center projects have been announced.

One is a massive new cryptocurrency mining facility and data center being developed by Talen Energy and constructed by Cumulus Data. The development will be on a campus adjacent to and powered by the Susquehanna Steam Electric Station nuclear power plant in Salem Township, Luzerne County. The combined $400-million project could expand to a billion-dollar investment, Yudichak said.

The second multibillion-dollar project that recently received a zoning approval is for a two-million-square-feet data center in Chester County, Pa., that will become the largest in the state, Yudichak said.

Act 66 and Act 25, the senator said, have “really shifted the mindset of the legislature in terms of focusing on smart tax policies that unleash private equity to create jobs in the private sector.”

Looking ahead, Yudichak said he supports “another smart tax policy” bill sponsored in June by Republican state Sen. Ryan Aument, Senate Bill 771, which would also amend the Tax Reform Code of 1971 by providing for a yearly reduction in the corporate net income tax from the current 9.99 percent to 6.99 percent by 2024. Yudichak has signed on as a cosponsor of SB 771. 

“It’s going to be an exciting time over the next 10 years as we create jobs in the 81-corridor in e-commerce and logistics, and we create manufacturing jobs like Nacero that have an opportunity to not only change northeastern Pennsylvania, but to really change our United States manufacturing of gasoline over the next century,” he said.