The following editorial appeared in The (Hanover) Evening-Sun.
One of the centerpieces of Gov. Tom Wolf’s campaign was a proposal for a 5 percent extraction tax on natural gas production in the state’s Marcellus Shale region.
Wolf recently made good on that promise, making his proposal official and sending it to the General Assembly — where it has the appearance of being dead on arrival.
The Republican response was quick and harsh. GOP lawmakers lined up to express opposition to the tax. The talking points were remarkably similar, demonstrating a discipline of message that has become a hallmark of our politics.
Republicans were quick to come out to defend the natural gas industry, saying the proposal would put an undue tax burden on the companies.
And they repeated the old argument that the tax would be a job killer, saying natural gas drillers would abandon the commonwealth for states with lower tax rates on their industry. But, as the Wall Street Journal reported last year, “Pennsylvania has the lowest effective tax rate for natural gas production when compared with 10 other high-production states.”
The Journal cited a study conducted by the state’s independent fiscal office that concluded that Pennsylvania’s effective tax rate on natural gas production was lower than Ohio’s, Louisiana’s, Texas’ and West Virginia’s. The state’s effective rate — which takes into consideration tax incentives granted to the industry — is 1.6 percent. In Ohio, it’s 1.8 percent. In Louisiana, it’s 2.6 percent. Texas, 4.6 percent. West Virginia, 7.2 percent.
Opponents of the governor repeated the mantra that the 5 percent tax is actually a 7.5 percent tax, when the 5 percent figure is coupled with Wolf’s proposed 4.7-cents-per-thousand-cubic-feet tax on extracted gas. Wolf’s calculations set that figure at 5.8 percent.
Either way, it’s still competitive with other gas-producing states. West Virginia, for instance, also levies a 5 percent extraction tax and a 4.7-cent-per-thousand-cubic- foot fee.
Remaining competitive is, of course, important. But the one fact that remains is that the gas is here. If drillers want it, they have to drill here.
Pennsylvania is looking at a budget deficit of more than a billion dollars this year. The state is required to balance the budget. The money has to come from somewhere.
Wolf has proposed using that income to help fund school districts and perhaps lessen the dependence on property taxes. He said some of the revenue should also be directed to communities affected by natural gas drilling, paying for infrastructure improvements and other costs associated with fracking.
If Wolf’s extraction tax proposal goes down in flames, where is the money going to come from? Property taxes? Increased taxes on working families? Thin air?
Yes, the use of gas tax revenue is a legitimate area of debate. Perhaps it could be used to offset the looming deficit — spread across various state agencies to make up the slack. And no, it won’t solve all of our problems — as extraction tax revenue projections deflate along with the price of gas.
But a severance tax appears to be the least painful, least regressive means of raising revenues at a time the state is in dire need.
The facts are on Wolf’s side. And that should matter.