A Tax Credit Designed To Create Jobs Might Just Be Losing PA Money

Feb 14, 2019

Pennsylvania first launched its Job Creation Tax Credit back in 1996. According to state officials, it was one of the first credits of its kind—a measure intended to give employers incentives that neighboring states were already providing.

The problem?

It appears the credit might not be making the commonwealth money at all.

The credit gives employers $1,000 per job, and $2,500 for hiring veterans and the unemployed.

But in a recent review and subsequent hearings before House and Senate members, the state Independent Fiscal Office has said that isn’t enough money to motivate employers to create jobs.

In fact, director Matthew Knittel estimated 95 percent of the positions the program helped create would have happened regardless.

“We found it had a negative return on investment,” Knittel said. “That is, it was generating a net loss.”

Knittel suggested converting the credit money to grants, routing it into a more successful job program, or even just ending it.

The Department of Community and Economic Development is resisting the suggestion.

Deputy Secretary Scott Dunkelberger said while they’re open to improvements, the credits have value.

“Based on the number of companies that actually take the tax credits, we believe that it’s definitely useful to them,” he said.

He added, an applicant “has to say that they are creating these jobs in part because of the availability of these tax credits.”

Pennsylvania isn’t the only state struggling to prove the utility of job-creation tax credits.

Twenty-four other states have comparable credits, and the IFO noted, studies tend to show their impact is minimal at best.