Confirmed Again: Gov. Wolf’s Energy Tax Highest in the Nation

MSC_social1

Gov. Wolf’s massive energy tax hike would establish Pennsylvania as the nation’s highest effective energy tax state, according to the state’s nonpartisan Independent Fiscal Office (IFO). Far from “modest” or “responsible”, IFO’s findings – highlighted in a joint senate hearing yesterday – further underscore the fact that even higher energy taxes threaten jobs and jeopardize shale’s economic and environmental benefits.

From IFO director Matthew Knittel’s testimony:

For 2016, the analysis projects an average tax rate of 17.3 percent under the proposed severance tax. … In summary, the proposed severance tax will likely move Pennsylvania … to the highest taxes state.”

What’s more, IFO’s factual analysis stands in stark contrast to the myth that Gov. Wolf’s massive energy tax hike would place Pennsylvania “somewhere in between” other major energy-producing states.

Capture

Click HERE to watch this video online.

And as the MSC’s Dave Spigelmyer testified, it’s mission critical for leaders in Harrisburg to focus on commonsense policies that encourage economic growth and investment, particularly as it relates to our manufacturing potential, rather than even higher energy taxes that will cost good-paying local jobs, including for our region’s union workforce:

“The real opportunity presented by this industry comes in the area of affordable and abundant energy for this Commonwealth. If we direct our initiatives towards utilizing this abundant and affordable energy resource to reestablish and grow new manufacturing and business opportunities for this Commonwealth, thousands of jobs will be generated and new tax revenues will flow into Harrisburg and back into communities throughout this Commonwealth. The time for empty promises and over-the-top campaign rhetoric is long over. We need commonsense solutions that focus on our future.”

Here are key highlights from yesterday’s senate hearing:

EVEN HIGHER ENERGY TAXES THREATEN PA JOBS

  • Additional Taxes Threaten Pa. Jobs: “The development of natural gas has created tens of thousands of jobs, reduced utility bills for all Pennsylvanians and improved the environment. … Nearly 600,000 Pennsylvanians work in the manufacturing sector, and the state’s leadership roles in energy production, should it be sustained by sensible regulatory and tax policy, will translate to even more opportunities for job growth and economic expansion in the manufacturing sector and beyond.” (Pa. Chamber of Business and Industry, 6/1/15)
  • Higher Energy Taxes Will Cost Jobs, Increase Energy Costs: Pa. is in a unique position in the U.S. With the huge potential reserve and supply of natural gas, the Commonwealth has a tremendous advantage to leverage this resource for manufacturing and electric generation. The job creation engine that our industry has become will be even larger if we establish the right government policies to bring new business and manufacturers to the Commonwealth. The Governor and General Assembly should be looking directly at policies to enhance this industry as leverage to help it fully develop into an attractive alternative for manufacturing. … This should be a longterm focus of our state’s leadership. (PIOGA, 6/1/15)
  • Current Impact Tax Help Communities, Important Environmental Initiatives: To put it succinctly, increasing energy taxes is simply bad public policy. … It’s time to call the local impact fee what it really is – a severance tax. … Not only does the local impact tax help local communities, it also helps support government and environmental grant programs. … Why would Pa. risk throwing this all away with instituting additional taxes on energy. … Capital is moveable and will go where the return on investment has the greatest potential. … It’s a complete fallacy to say that “the gas is here and companies are not going to leave.” … An additional energy tax makes investment decisions more difficult and places Pennsylvania further at a competitive disadvantage. (API, 6/1/15)
  • Pa.’s Current Impact Tax Policy Works as Design: The governor’s proposed tax policy will stifle Pa. economic growth and harm employment opportunities. Pa.’s natural gas industry contributed $225,752,000 in impact tax revenues in 2013. These fees helped support essential services in the areas where we operate. The new, additional proposed taxes will reverse the positive economic benefits realized over the last few years as a result of Pennsylvania’s shale gas revolution. … For example, residential customers … saved $350 million in 2014 compared to what they paid in 2008. (ANGA, 6/1/15)

NATION’S HIGHEST ENERGY TAX

  • Pa. Would Have “Highest Effective Tax Rate in the Country” Under Wolf Tax Scheme: If Gov. Tom Wolf’s severance tax is adopted as proposed, Pa. would likely carry the highest effective tax rate among gas-producing states in the country, the director of the state’s IFO testified Monday. During a joint hearing of the Senate’s environmental resources & energy and finance committees, IFO Director Matthew Knittel said the effective tax rate would amount to 7.3 percent, the highest among other large gas-producing states. … “The proposed severance tax will likely move Pa. … to the highest tax state.” (Pittsburgh Business Times, 6/1/15)
  • Wolf Energy Tax Scheme Would Make Pa. “Highest Taxed State”: If [Gov. Wolf] gets his way, he could move Pa. from having one of the lowest effective gas tax rates in the country to one of the highest. That was the analysis presented Monday at a joint senate committee hearing in Harrisburg from the state’s IFO. … “The proposed severance tax will likely move Pa. … to the highest tax state,” says IFO director Matthew Knittel. … [Representatives] from the gas industry, who oppose the tax, were quick to warn legislators it would curb economic growth. “Make no mistake, we will witness significant major decline in capital outlay in Pennsylvania,” said Dave Spigelmyer, head of the gas trade group, the MSC. “This tax matter could not come at a more difficult time for an industry that’s already under economic pressure.” (StateImpact, 6/1/15)
  • Higher Energy Taxes Drive Away Investment, Jobs: “Capital in Pa. will move like water” if the tax is enacted, David Spigelmyer, president of the MSC said. “You can line up at the border and watch rigs move into Ohio.” Republicans on the committees said already has a high tax burden and questioned the structure of the Democratic governor’s tax proposal. … Wolf’s proposal, though, includes setting a floor price of $2.97 per thousand cubic feet of gas. That would have the effect of raising the tax rate when prices are low. At the current prices, the effective tax rate under Wolf’s proposal would be about 17 percent in 2016 … Matthew Knittel, director of the state IFO, testified. … That would rank Pa.’s tax higher than other producing states, including Texas and Oklahoma. (E&E News, 6/2/15)
  • Pa. Would Have “Highest Effective Severance Tax Rate”: Gov. Wolf’s proposed severance tax on shale gas would shift Pa. … to the highest effective severance tax rate among seven major gas-producing states. … The combined terms of Mr. Wolf’s proposed tax on both the value and volume of natural gas are projected to amount to a 17.3 percent tax in 2016, the first year it would take effect, [Matthew Knittel, director of the IFO] said. … “The dialogue on this important issue has become centered around a fundamentally false choice: you’re either for a higher energy tax or you’re against children’s education and future,” said David Spigelmyer. “By exploiting children to suggest that the natural gas industry is to blame for the failings of our state’s longstanding structural fiscal challenges is absurd.” (Post-Gazette, 6/1/15)
  • Higher Energy Taxes “Could Not Come at a More Difficult Time”: The health of the gas industry at a time of low prices came in for debate. “This tax matter could not come at a more difficult time for an industry already under significant economic pressure,” said Mr. Spigelmyer. He said shale operators in Pa. have reduced their 2015 investments by more than $9 billion and many firms have had layoffs. … Adopting the proposed severance tax would likely move Pa. from being one of the lowest energy tax states to the highest tax state compared to other major gas-producing states, said Matthew Knittel, director of the state IFO. (Times-Tribune, 6/2/15)
  • Even Higher Energy Taxes Risk Shale’s Long-Term Success: Gov. Wolf’s proposed severance tax would take Pa. from last place to first among major gas-producing states in taxing the extraction of natural gas, according to IFO. In testimony before a Senate committee Monday, IFO Director Matthew Knittel said the effective tax rate after all state taxes are accounted for would be 7.3 percent. Neighboring states like Ohio and West Virginia levy taxes of 0.8 and 5 percent, respectively, while Texas’ taxes range from 3.1 to 3.5 percent. “The (proposed) severance tax exceeds West Virginia by about 2 percent due to the tax on volume and the disallowance of deductions for post-production costs,” he said. … “Right now, we need to make sure we’re in a position to grow investment into Pa. and allow this industry to succeed long-term,” [said MSC’s Spigelmyer.] (PennLive, 6/1/15)

Take action today to stand with working families, local communities and small businesses across the Commonwealth in our efforts to protect jobs and economic opportunity for generations to come.