MSC in PennLive: Say No to a Severance Tax – It’s a Job-Crusher

By David Spigelmyer

This budget season, we’ve seen encouraging signs of true leadership from some who are committed to creating new, long-term job and economic growth opportunities for the Commonwealth.

Unfortunately, we’ve also heard from some lawmakers whose only “solutions” are massive, job-crushing energy tax increases.

It’s time for a fresh look at the real solutions that will enhance Pennsylvania’s competitiveness and make our state a better place to invest, hire and grow over the long-term.

With natural gas development, manufacturing jobs are coming back to Pennsylvania. From the ethane cracker plant under construction in Beaver County to the revitalization of Marcus Hook along the Delaware River, the Commonwealth is undergoing a positive and potentially generational transformation.

If our state leaders look to our natural resources as an economic growth engine that fuels opportunities to create new jobs and manufacturing growth – rather than a quick-fix to patch longstanding, systemic financial woes – we can continue the progress made and create additional opportunities for Pennsylvania.

From a tax perspective, Pennsylvania’s impact fee – our state’s tax on natural gas development, which has been in place for six years – is working. This unique tax has generated more than $1.2 billion in new revenue for the Commonwealth and, last year, represented a 9.16% effective tax rate on production – the highest effective rate of any state that imposes a drilling activity tax.

Pennsylvania’s one-of-a-kind impact tax generated more revenue last year than the combined severance tax revenues in four of the nation’s largest energy producing states including Arkansas, Colorado, Ohio and West Virginia. Think about that. While some suggest that Pennsylvania’s natural gas producers aren’t “paying their fair share,” the facts very clearly suggest otherwise.

This debate is not about whether Pennsylvania taxes natural gas development; it is about who oversees and directs the hundreds of millions of dollars in new revenue. Currently, the natural gas impact tax empowers county and municipal leaders by keeping revenues local for community projects, as well as funds of environmental and conservation programs.  And it should remain that way.

In fact, we already know that the states that heavily rely on severance tax revenues to balance their budgets have suffered in recent years as the energy market continues through a historic downturn that’s resulted in deep and painful job loss. Texas, Oklahoma, North Dakota, and neighboring West Virginia have recently faced massive budget deficits, resulting in deep cuts to programs because of over-reliance on the unstable tax.

While it may be politically expedient for some, higher energy taxes will harm job creators, small businesses, consumers, and damage the Commonwealth’s ability to compete for investments that are needed to create good-paying local jobs.

Pennsylvania is not the only state with shale resources. That cannot be lost on anyone. Competition for limited capital investment is fierce and business decisions are based on where energy producers can receive the best return on investment. Unfortunately, we’re already falling behind states along the Gulf Coast and the Permian Basin, as Pennsylvania’s burdensome regulatory structure coupled with a permitting logjam and the continued threat of even higher taxes is driving investment elsewhere.

The commonsense path forward are solutions that streamline permitting delays, encourage investment in natural gas production and use, and attract new manufacturers that can capitalize on our abundant and affordable resources.

Our leaders are facing critical choices, and we hope and strongly encourage them to embrace policies that create more Pennsylvania jobs, economic opportunity, as well as energy production and manufacturing growth. Doing so will create longer-term, stable revenue for the Commonwealth.

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