Liberal Republicans Push Severance Tax With Sophistry

A small group of the General Assembly’s liberal Republicans banded together this week to join their Democrat colleagues’ cry for Harrisburg to impose a severance tax on Marcellus Shale gas.

“There’s a theory out there that we shouldn’t be taxing this industry,” said Bucks County state Representative Eugene DiGirolamo, who is regarded by many capitol observers as a Republican in name only, or RINO.  “They pay this tax in every other state that they operate. This is a price of them doing business.”

“I think there might be a collective belief on the part of many of my colleagues that perhaps the industry is not paying its fair share,” said Representative Tom Murt, a Montgomery County Republican.

Contrary to the deceptive rhetoric of DiGirolamo and Murt, natural gas drillers in Pennsylvania are heavily taxed and might even be paying more than their “fair share.” They are subjected to the same state tax burden that every business in Pennsylvania bears, including the highest effective corporate income tax rate in the industrialized world. Since the natural gas boom began, drillers have paid over $1.7 billion for corporate taxes, $400 million for impact fees, and $500 million for road repairs—not to mention $800 million in land royalties last year alone.

“In reality, gas companies are already paying for more government than they’re using,” said the Commonwealth Foundation’s Elizabeth Stelle. “Clearly, the primary goal of a new severance tax is to line the pockets of special interest groups like government unions that profit off  bigger, more expensive government.”

Conservative Republican State Representative Eli Evankovich of Westmoreland County echoed Stelle’s thoughts. “People who are advocating for more revenue from natural gas want to spend more,” he said. “They’re not offering to give a tax cut to the people of Pennsylvania.”

Marcellus Shale core industries [drilling, gas extracting, pipe laying] provide more than 20,300 jobs in the commonwealth. All Marcellus Shale-related industries [including ancillary industries such as trucking and testing laboratories] employ more than 214,000 people. The average pay in core industries is more than $75,000, while the average salary in all industries in Pennsylvania was less than $45,500.

But Murt, DiGirolamo, and Democrats dismiss the economic concern that a severance tax could be the noose around the state’s golden goose.

“Let’s debunk the myths that the jobs will go away,” said Democrat Senator John Yudichak. “Where are they gonna go?  Arkansas, Texas, Wyoming, North Dakota, where they have a severance tax? West Virginia, Ohio, where they have a severance tax?”

Yudichak conveniently omits that states which impose a severance tax also have an overall corporate tax burden much lower than Pennsylvania’s. Texas and Wyoming, for example, have no state income tax.

The bottom line is that the legislature’s bipartisan coalition of big spenders view the natural gas industry as an easy target to satiate their appetite for profligacy, the economic reality of industry flight to other states be damned.