The following editorial appeared in The Philadelphia Inquirer.
The trouble with Gov. Tom Wolf’s natural-gas tax is that it wasn’t imposed five years ago.
Thanks to the Rendell administration’s halfhearted support for a tax and the Corbett administration’s misguided opposition, Harrisburg slumbered — and schools and other services suffered — while the Marcellus Shale boomed.
It’s Wolf’s misfortune to be attempting to address this failure in the midst of a gas glut. Given that the regional natural gas price has plummeted by more than half over the past year, legislators and others have rightly questioned whether the governor’s projected $1 billion a year in revenue from the levy is realistic.
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Rather than adjust its projections or raise the rate, however, team Wolf has a plan to simply ignore falling fossil fuel prices.
While the bulk of Wolf’s tax would be nominally based on the value of gas extracted, the bill proposed in the legislature last month would set a floor on that value. Wolf’s advertised 5 percent tax rate would apply only as long as the price of gas is at least $2.97 per thousand cubic feet. Below that, the state would continue to tax gas as if it were selling for $2.97 a unit, increasing the effective rate.
That minimum is notable for being significantly higher than the current price of gas. It would also be unique: The state would have the only extraction tax with a price floor nationwide.
That’s a sign of overreach. True, as Wolf has pointed out, Pennsylvania shouldn’t be the only major gas producing state without an extraction tax. But it shouldn’t be the only state that taxes gas heedless of price either.
Like West Virginia’s tax, which served as a model, Wolf’s proposal also includes a component based on the volume of gas extracted, which provides a measure of protection against price fluctuations. That makes the proposed price floor that much harder to defend.
Of course, the details of the Democratic governor’s gas tax and other budget proposals will have to be negotiated with the legislature’s ruling Republicans, who have already called on Wolf to agree to pension and liquor control reforms — as he should — before they make concessions on taxes.
Wolf’s policy secretary, John Hanger, told The Inquirer’s Andrew Maykuth that the administration is “open to conversations about modifications” of the price floor.
Better yet, they should drop the minimum altogether. Ignoring gas prices threatens to bolster the otherwise bankrupt antitax arguments of gas industry lobbyists.
The extraction tax is the most reasonable proposal in Wolf’s revenue-raising arsenal. The administration should keep it that way.