Why Does Tom the Taxman Wolf Keep Lying About Severance Taxes?

natural gas boats - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

 

Tom “the Taxman” Wolf never relents in spreading lies when it comes to severance taxes because he aims to reward the public employee unions who are his base.

Tom Wolf, the taxman, was at it again yesterday, telling Southeastern Pennsylvania (Philadelphia region) politicians how he wanted to rescue them and their public employee union political base with a severance tax on natural gas. He repeated, yet again, the same lies he’s been telling since he ran for Governor in 2014, starting with the fact out-of-staters would pay most of the tax and, of course, continuing to pretend we don’t already have a severance tax that produces more revenue than other states he cites as examples.

severance taxes

Tom “the Taxman” Wolf is not especially smart, having made as many enemies within his party as outside it. He’s a trust-funder through and through, having inherited a company run by others and devoted his life to trying to look smart. He’s also a liar of the first order as he proved with this news release:

Harrisburg, PA – Today, Governor Tom Wolf stood with Southeast lawmakers to urge the legislature to pass a severance tax.

“The fairest and simplest solution to the current budget challenge is a severance tax on natural gas production,” Governor Wolf said. “The House could still do the right thing and vote on a severance tax.”

The Independent Fiscal office recently reported that more than 80 percent of Pennsylvania’s natural gas is purchased by residents in other states and even international markets.

“That means that 80 percent of the revenue raised by a reasonable severance tax will be paid by customers outside of Pennsylvania,” Governor Wolf said. “Our gas is currently being used tax-free by citizens of other states, while Pennsylvanians are paying taxes that help build roads and schools in Texas and Louisiana. Pennsylvanians deserve to share in this prosperity.”

Because so much of the severance tax will be paid by customers outside Pennsylvania, a severance will have a minimal effect on utility bills. Estimates by independent agencies suggest that if Governor Wolf’s severance tax proposal is enacted, Pennsylvania electric bills will increase at a rate significantly less than the rate of inflation.

“Sixty-seven severance tax bills have been introduced in the legislature over the past seven years with only one, which was passed by the Senate this year as part of the budget, ever receiving a vote,” Governor Wolf said. “It’s beyond time to get this severance tax passed; a tax that will only benefit Pennsylvanians.”

Wolf knows Pennsylvania already has an impact fee that produces more revenue ($173.3 million) than the combined severance taxes gathered last year by Ohio ($36.67 million), West Virginia ($69 million), Colorado ($26 million) and Arkansas ($38.2 million).severance taxes The problem, for him and his ilk, is that the money doesn’t primarily go to Southeast Pennsylvania where the bulk of his tax and spend constituency (mostly comprised of public employee union members with pensions no one can afford) resides. He doesn’t like a severance that distributes the money to the most impacted communities who produced it. He wants to steal it for his voters.

Taxman Tom also knows something else; his proposed severance tax would be deducted as a cost of doing business from the royalties paid to landowners, about whom he cares zilch. Consumer prices are protected by competition that requires gas companies to sell at  market prices.

Natural gas is a commodity business like milk production where buyers determine prices and producers can only reliably profit by constantly lowering costs. Occasional bursts of demand will raise prices but, long-term, higher pricers leads to more supply and, rather quickly, lower prices once again. There is a natural equilibrium based on global-nature market demand that no one state determines. Cost savings can be passed onto consumers much more easily than cost increases unless those increases are also global in nature.

Pennsylvania, in other words, can’t double-down on severance taxes without reducing the amount of demand for Pennsylvania gas. The market will be supplied from elsewhere unless gas companies are able to pass the cost onto landowners, but there’s a limit to that as well. Landowners will simply not cooperate and will either not sign new leases and/or go to the legislature for relief.  The inevitable result is that gas companies will simply make their next investments elsewhere where it’s easier to do business. Severance taxes destroy demand, hurt landowners and deprive communities of needed economic development. Gas companies can survive a severance tax by moving elsewhere but the rest of us…not so much.

Yes, Tom the Taxman knows all this if he has even half a brain; which is what makes his spinning about consumers from other states paying the bill so egregious. His severance tax talk to Southeastern Pennsylvania legislators wasn’t economics but, rather, pandering to pols indebted to public employee unions and wanting an easy way out on pensions or simply desiring a piece of the pie to pass out without having done anything for it. That’s the reality of what Tom Wolf is doing and it’s as small-minded as it gets. Lying is the first resort of scoundrels.

The post Why Does Tom the Taxman Wolf Keep Lying About Severance Taxes? appeared first on Natural Gas Now.

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