A re-evaluation of state personal income tax returns has shown Pennsylvania received much less tax money than it expected from natural gas royalties.
Pennsylvania’s Department of Revenue last week released an updated report on how much Marcellus Shale-related revenue it received in personal income taxes — a figure that shines light on the amount, in rent and royalties, that state residents are receiving from gas companies.
The report downsized its original estimate of $102.7 million to an actual figure of $46.2 million, a revision that Sharon Ward, director of the liberal-leaning Pennsylvania Budget and Policy Center, said ran against industry claims its tax contributions were sufficient.
“We have maintained that the industry for a long time has overstated the economic benefit of Marcellus Shale gas drilling and understated its impact,” Ward said. “This revision by the Department of Revenue is an acknowledgment that their optimistic estimates have not been borne out.”
Revenue Department spokeswoman Elizabeth Brassell said both its earlier estimate and its newly released report were objective and based on facts.
“We changed the number because the facts had changed,” she said.
The first estimate was made in May based on payments received, and the numbers were updated after the department began to pay out income tax returns in October and discovered many taxpayers had overestimated their liabilities.
“We found more repayment was due than we had previously counted on,” she said.
The Department of Revenue only recently began reporting gas industry-specific data and Brassell said there are still kinks to its tracking system that needed to be worked out.
“We’re still working at refining our model, but I don't know if we’ll ever get there,” Brassell said.
One piece of data that might not be able to be narrowed down, Brassell said, is the true amount of personal income taxes paid by pass-through entities such as partnerships or limited liability companies.
“They can take income and pass it through to personal income, and that’s much more difficult to put a pinpoint on,” she said.
Ward, of the Pennsylvania Budget and Policy Center, called the estimated $10 million the state received in personal income taxes from pass-through entities “a very small amount.”
“While the industry is making a contribution, it’s still a modest one,” she said. “Certainly the industry is not paying for the full cost of the variety of impacts it’s having on roads, emergency responders, all of that. Those costs are really being borne by local government and local taxpayers.”
A statewide impact fee, under consideration in Harrisburg, would go far in addressing the issue, she said.
Patrick Creighton, a spokesman for the Marcellus Shale Coalition, a gas industry group, said the revenues will increase as the industry continues to grow in Pennsylvania.
“The Marcellus revolution only started a few short years ago,” he said.
The Department of Revenue’s estimate that the industry had paid $1.5 billion in taxes to Pennsylvania since 2006 shows it is paying its fair share, Creighton said.
“These are hundreds of millions of dollars being collected by the government in revenue that, if it were not for this industry, that money would not exist,” he said. “For those who say the industry does not pay taxes, the numbers speak for themselves.
“The industry is committed to long-term growth in the commonwealth,” Creighton continued. “And with that will come additional revenues for the commonwealth.”
Cliff White can be reached at 235-3928.