Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Case against Shale Tax Is Running out of Gas

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Case against Shale Tax Is Running out of Gas

Article excerpt

The governor wants a higher severance tax on natural gas, and he told drillers last week that this was fair because "every time you take valuable things out of the ground you make us poorer."

You might dismiss that as typical Democratic hyperbole, except that quote doesn't come from Pennsylvania Gov. Tom Wolf. It's from John Kasich, the conservative Republican governor of Ohio.

There may be no better indicator of how deferential Pennsylvania has been to drillers than that. Pennsylvania is the largest natural gas-producing state without a severance tax.

An analysis by the state Independent Fiscal Office last March, when Pennsylvania was coming out of a year in which it was second only to Texas in shale gas production, found that we had the lowest effective tax rate among 11 comparable gas-producing states. That study took pains to include all other taxes and fees on producers.

Former Gov. Tom Corbett had no interest in a severance tax, which surprised even people in the industry. No poker player, Mr. Corbett looked at Pennslyvania's hand and folded. He somehow figured if we taxed it like other states do, drillers would stop coming to the heart of the largest natural gas field outside of Iran.

Or maybe his hesitance had something to do with all the campaign contributions he got from drillers. In any case, what Pennsylvania got three years ago instead of a severance tax was a local impact fee. That brings in about a third or less of the revenue that Mr. Wolf aims to raise in a new proposal.

Pushing a severance tax was a central campaign pledge for Mr. Wolf, as was devoting "the lion's share" of the money to public education. The governor made a big pitch for that at an elementary school on Valentine's Day. The polls say the people are with him, but the Republican majorities in the state House and Senate weren't elected to be sheep to this Wolf.

Nonetheless, with the budget tight, there's room for the Republicans to barter their desire for state pension reform for a severance tax. That's politics.

The usual argument against a tax, that this could drive business away, has a pretty easy rebuttal: Where they gonna go? …

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