Issue Spotlight: Pennsylvania's Natural Gas Impact Fee
In 2012, Pennsylvania enacted an “impact fee” on natural gas wells drilled into Pennsylvania’s Marcellus Shale that generates a relatively small amount of revenue from the expanding gas industry. PBPC estimates that, using a “moderate” production scenario, Pennsylvania's impact fee will bring in less revenue than a severance tax comparable to that of Texas or West Virginia. As production increases over time, the gap grows larger between the revenue generated at the West Virginia or Texas tax rates and from Pennsylvania’s impact fee.
Conventional wisdom may hold that Gov. Corbett fell short in his reelection bid because voters, and his own party leaders, didn’t much like him.Some pundits will say he didn’t do a good job selling his ideas.The fault lies not in his personality, nor his communications, but in the policies the governor pursued.
On Tuesday Pennsylvanians sent a clear message that education matters to them, and they endorsed a severance tax as a way to pay for it.
Working families in Pennsylvania pay a far higher share of their income in state and local taxes than the state’s wealthiest earners. And – thanks to corporate tax loopholes, the phase out of the capital stock and franchise tax, and other tax breaks – taxes collected from corporations in Pennsylvania have declined as a share of total tax revenue over the past 30 years … and the share coming from individual taxpayers has increased.
State lawmakers must produce a balanced state budget in the face of a $1.5 billion budget shortfall. A state severance tax could help to achieve that goal and prevent cuts to investments that are important to Pennsylvanians, including public education, early childhood, health care, and programs for children and adults with disabilities. A 5% severance tax would raise $600 million in 2014-15 and $1.4 billion annually by 2018-19. It is a recurring source of revenue that could reduce reliance on one-time changes, fund transfers, payment delays, and other strategies that are unsustainable over the long term.
Harrisburg (June 12, 2014) – As state legislators face a $1.5 billion state budget shortfall, a new analysis by the Pennsylvania Budget and Policy Center (PBPC) shows that corporate net income tax (CNIT) payments made by drillers have fallen to pre-Marcellus levels even as gas production has boomed.
The market value of natural gas produced in Pennsylvania exceeded $11.8 billion in 2013 yet natural gas producers pay among the lowest effective production tax rates in the country. Companies paid $223 million in impact fee for gas produced in 2013, for an effective tax rate of less than 1.9%.
Momentum is building to enact a natural gas severance tax in Pennsylvania. But don't take it from us. The Triadvocate has an analysis of the debate that concludes an extraction tax is "almost a fait accompli."