Governor Wolf and supporters of his plan to triple-tax Pennsylvania energy have recently taken liberties with their arguments in favor of this misguided policy. Pennsylvanians deserve to know the truth behind this political speak. Let’s check a few of the claims:
CLAIM: “There’s room for the (natural gas) industry to pay more.”
FACT : Pennsylvania operators already pay a tax on natural gas development. In fact, this unique tax on shale gas — the impact fee — is set to generate nearly $1.7 billion since 2012, including a record $247 million this year.
This tax revenue, when combined with other business taxes paid by the industry as well as lease bonuses and royalties tied to natural gas development on state land, has provided nearly $5 billion in new revenue since shale gas development began.
We might suggest an edit to this claim: “There’s room for the oil and gas industry to attract more investment.” Pennsylvania is well positioned to stimulate economic growth and create family-sustaining jobs. A McKinsey study funded by the Forge the Future initiative estimated that shale development could boost Pa.’s GDP by $60 billion, add more than 100,000 jobs and generate billions in state tax revenue – if proper policies are in place.
Rather than pushing policies that undercut this growth potential, our leaders in Harrisburg should be leaning into this generational opportunity by encouraging a friendly environment for investment.
CLAIM: “Implementing a severance tax here in Pennsylvania would not drive out the industry.”
FACT : The business climates in Pennsylvania and Texas are so different that they cannot be compared.
In fact, CNBC ranked Texas first in its America’s Top States for Business 2018 ranking, while Pennsylvania clocked in at No. 22. Operators in the Permian Basin have lower permit fees, faster turnarounds, different tax structure, and a readymade infrastructure network.
Policymakers that advocate for a severance tax almost always note that Pennsylvania is the only state without a drilling tax (false – see impact fee above.) But if we’re using Texas as a model for taxation policies, let’s not be picky and choosy! How would our policymakers in Harrisburg feel about the advice Gov. Greg Abbott offered during his 2017 State of the State address:
“Another way for Texas to grow jobs is by cutting taxes and regulations on business. Ben Franklin said the only two certainties in life are death and taxes. As far as I’m concerned, the only good tax is a dead tax. We must continue to cut the business franchise tax until it fits in a coffin.
Yes, Pennsylvania has an incredible energy advantage, but we are by far not the only state with a prolific shale play. About 30 other states have shale resources. And in today’s globalized world, competition is not limited to U.S. states. Pennsylvania must vie for investment against the entire world.
CLAIM: There is no funding solution in place to repair or replace the Commonwealth’s infrastructure.
FACT : Pennsylvania’s natural gas impact tax generates hundreds of millions of dollars annually for critical infrastructure programs across the entire Commonwealth. Communities will receive their share of this year’s natural gas tax revenues this month, which will be dedicated to strengthening roads and bridges, improving parks and trails, flood mitigation and emergency services, to name just a few priorities.
In addition to money that goes directly to counties and townships, the Commonwealth Financing Authority has approved 715 projects funded by the impact tax, an investment totaling more than $117 million in communities across the state. These projects are proposed and designed by local leaders to address communities’ most pressing needs, such as improved sanitation, road repairs, flood mitigation or open space preservation.
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