FACT CHECK: Higher Energy Taxes Hurt Jobs, Economic Opportunity

As budget negotiations in Harrisburg extend into a new fiscal year, a few, loud, voices have made baseless and downright false claims in arguing for a job-crushing massive energy tax increase. Here are the facts and show of support from the wave of Pennsylvanians – business, elected officials, labor, etc. – who support natural gas development and are opposed to more job-killing taxes.

✓ Pa. is the only state to tax natural gas through an “impact fee”
✓ Impact tax has generated $1.2 billion in new revenue
✓ At 2016 market prices, impact fee = 9.16% effective tax rate
✓ Unique impact tax is in addition to nation’s 2nd highest business tax rate
✓ Higher energy tax proposals would make Pa. the highest taxed natural gas producing state

CLAIM: Pennsylvania is the Only State Without a Severance Tax.

FACT: Rather than enact a severance tax policy that has left other energy-producing states with deep budget shortfalls, Pennsylvania is the only state with an Impact Tax – called the Impact Fee – that directly supports community programs in all 67 counties.

  • While higher energy tax advocates selectively cite taxes in other energy-producing states, they perhaps purposefully fail to mention the plummeting revenues and massive budget deficits many of those states have recently faced. According to the Energy Information Administration, states such as Oklahoma, West Virginia, Texas and Wyoming – that all rely on severance tax revenue – faced recent budget challenges, forcing them to “re-evaluate operating budgets and taxation structure to address revenue shortfalls.”
  • So why do some in Harrisburg want additional energy taxes that will jeopardize jobs and economic opportunity?
  • Pa.’s unique tax on natural gas continues to be a policy solution that’s working as designed, directly benefitting communities in all 67 counties throughout the Commonwealth.

  • Since 2011, Pennsylvania’s impact fee – which based on 2016 market prices equates to a 9.16% effective natural gas tax – has generated more than $1.2 billion in new revenue supporting community programs, local infrastructure projects, as well as statewide environmental and conservation initiatives.
  • Researchers at Indiana University determined in a 2016 study that the Commonwealth’s natural gas impact fee tax serves as an effective national model, concluding that other states should consider “adopting targeted reinvestment policies for energy development that are similar to Pennsylvania’s impact fee structure.”

CLAIM: Natural Gas Producers Must Pay Their “Fair Share”

FACT: Pennsylvania’s unique impact tax, which is in addition to the Commonwealth’s 2nd-highest in the nation corporate net income tax, has generated more than $1.2 billion in new revenue since 2011.

  • Natural gas impact tax structure empowers county and municipal leaders by keeping revenues local for community projects, rather than diverting them to the state’s general fund in Harrisburg.
  • A wave of county, township and municipal leaders continue to call on lawmakers to maintain the current impact tax structure because communities are “where the money should be.”
    • WBRE/WYOU: [Jessup Twp. Supervisor Dennis Bunnell] hopes state lawmakers don’t eliminate the impact fee program in order to impose a severance tax. “For (Gov.) Wolf to change that structure, I would be sad. I would be sad because I think this is where the money should be,” Bunnell said.
    • Tribune-Review: “The biggest concern I have in Westmoreland County is the way Act 13 is set up, everyone would benefit. Money goes back to the municipalities and the county,” Commissioner Tyler Courtney said. “If it goes to a severance tax, the money goes to Harrisburg and the general fund.”
    • Observer-Reporter: [Amwell Township Supervisor Wayne Montgomery]:The annual natural gas impact fee allocation is “a godsend.” “We’ve been able to do things at the park, on roads, with fire departments, stuff like that,” he said. “If we didn’t have the money, we wouldn’t be able to do all of this.”
    • Observer-Reporter: [Fallowfield Twp. Supervisor Wilbur Caldwell]: “Act 13 [impact tax] funds have been extremely beneficial to townships, especially in Washington County. We’re able to do things we couldn’t dream about before Act 13. [Losing Act 13 impact tax revenues] would be a very sad demise.
    • LancasterOnline: [Lancaster Co. Commissioner Dennis Stuckey]: “The impact fee is very valuable to the county. We have invested the Legacy Portion of the funds in our nation-leading Agriculture Preserve Program directly and with challenge grants to the Lancaster Farmland Trust.”

CLAIM: Severance Tax Proposals are “Modest” and “Sensible”

FACT: Gov. Wolf’s proposed energy tax hike would make Pennsylvania’s natural gas tax rate the nation’s highest and more than double that of major oil and gas producing states including Texas, Oklahoma and Louisiana.

  • Pa.’s nonpartisan Independent Fiscal Office confirmed for the third time in three years that Gov. Wolf’s massive energy tax increase proposal would give Pennsylvania the highest effective tax on natural gas in the country.

  • Wolf’s energy tax hike would make Pennsylvania’s tax on natural gas development nearly double that of neighboring state West Virginia and nearly triple that of the nation’s largest energy producing state, Texas.
  • This research should send off alarm bells to policymakers in Harrisburg who must focus on strengthening Pennsylvania’s competitiveness to help create good-paying local jobs as well as energy-intensive manufacturing opportunities across the state.
  • WATCH: IFO Director Matthew Knittel: “The proposed severance tax likely will move Pennsylvania to the highest taxed state relative to all other gas producing states.”

(Click HERE to Watch this Video Online)

CLAIM: Pennsylvania Energy Jobs Aren’t Threatened by Higher Taxes

FACT: Business and labor leaders agree: Higher energy taxes absolutely threaten good-paying jobs and Pennsylvania’s long-term opportunities tied to energy development.

  • Business and union leaders share a common concern — higher energy taxes will erode shale’s job-creating and middle-class benefits. To be sure, enacting the highest-in-the-nation energy tax will lead to even further reductions in investment and jeopardize good union jobs.
    • Jim Kunz, IUOE Local 66: “We have deep concerns about proposals to increase energy taxes. … We know that Pa.’s abundant natural gas reserves aren’t going anywhere, but it’s the investment necessary to develop those resources that can, does and will move elsewhere if tax policies are enacted that discourage investment here. And while energy companies can move their dollars elsewhere, thousands of union families across our region don’t have that luxury.” (Post-Gazette column, 7/27/15)
    • Dennis Martire, Laborers’ International Union of North America: “We do have significant concerns about any new natural gas tax that could have a negative impact on employment in the industry. We have already seen a reduction in pipeline man-hours over the past two years related to falling natural gas prices. If we excessively tax the shale industry, we risk hurting employers, workers and communities across the state.” (Delaware Co. Daily Times column, 7/19/15)
  • WATCH: Small Business Leaders Tell Harrisburg to Oppose Even Higher Energy Taxes

(Click HERE to Watch this Video Online)

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