Harrisburg Budget Choice: More Taxes or More Jobs

Member Group : PA Manufacturers' Assn.

Governor Tom Wolf has been travelling the state peddling this year’s version of his tiresome tax hike plan. His redundant tax on natural gas production is masquerading as an infrastructure improvement plan under the hopeful sounding name of “Restore Pennsylvania.” In typical tax-and-spend political irony, the plan would penalize the success of the very industry that is actually helping to restore Pennsylvania.

The Republican-controlled General Assembly has thwarted the governor’s plans for raising taxes throughout his tenure. As the June 30 budget deadline nears, the Republicans are advancing an agenda to increase revenues the proven, old-fashioned way: economic growth. House Speaker Mike Turzai’s “Energize PA” plan would encourage the oil and gas industry to invest even more in the state. Tens of thousands of direct and downstream jobs created under the expansion would bring in billions in additional revenue under Pennsylvania’s more-than-sufficient existing tax structure.

“Speaker Turzai’s pro-growth agenda for Pennsylvania energy points the way to a more prosperous future,” said PMA President & CEO David N. Taylor. “The best way for state government to get more revenue out of the natural gas industry is to help it grow.”

Energize PA brings back some proposals businesses have been seeking for years. Ideas such as increasing the cap on the net operating losses that a business is allowed to carryforward. But, most are aimed directly at the industry: expand the Pipeline Investment Program, for instance.

All eight of the bills are designed to bring in more of what’s happening right now in Beaver County – 3500 laborers, ironworkers, and other tradesmen (the number of workers is estimated to grow to 6500 this summer) building a multi-billion dollar plant on an old manufacturing site that takes wet gasses extracted from the Marcelles Shale and converts them into the synthetic building blocks for dozens of products. Currently, the investment in the construction site in Monaca, Pennsylvania is the largest investment by Royal Dutch Shell in the world.

“The right public policies combined with the right cooperation from the private sector can generate a $60 billion increase in Pennsylvania GDP, support the addition of 100,000 new jobs and potentially increase state revenues by $2 to $3 billion,” House Speaker Mike Turzai (R-Allegheny) said at a late April press conference introducing the package of bills.

Speaker Turzai isn’t exaggerating. The industry already contributes $45 billion to Pennsylvania’s economy, provides more than 300,000 family-sustaining jobs, and generates billions of dollars in bonus and royalty payments for Pennsylvania landowners. Government collects its share through corporate taxes, personal income taxes, sales taxes, permits, fees, and through an industry-specific impact fee that has generated nearly $1.5 billion for local government projects through 2018.

Along with the boost from the federal Tax Cuts and Jobs Act of 2017, natural gas production has helped drive Pennsylvania’s low unemployment rate (3.6 percent, the lowest since 1976) and rising wages.

Republican leaders have rightfully taken their share of the credit for this and for revenue collections that so far this year are more than $800 million above estimates, an astounding $1.8 billion more than collections at this time last year. They cite holding off on not just Wolf’s appetite for more taxes but former Democratic Governor Ed Rendell’s as well. And they are committed to keep on doing it.

“Just because the economy is flourishing under Republican economic policies, we do not believe it gives us a blank check to spend taxpayer dollars carelessly,” said Senate Majority Leader Jake Corman (R-Centre) after the April revenue numbers came in. “We remain steadfast in our commitment to fiscal restraint including holding the line on spending while fending off proposed tax increases.”

Holding the line on spending and taxes, and passing Energize PA, would help not just to restore Pennsylvania but bring it back to its former glory as the manufacturing hub of the world.

The bills:

HB 1100, Aaron Kaufer (R-Luzerne), mirrors the existing Pennsylvania Resource Manufacturing Tax Credit that was established during the 2012-13 budget. This legislation would help large manufacturers using PA methane in production.

HB 1101, Natalie Mihalek (R-Allegheny/Washington), would increase the percentage rate cap for net loss deductions, otherwise known as net operating loss (NOL), that a business may carry forward. The current percentage is 40%, and her bill increases that to 45% in taxable year 2020 and 50% in taxable year 2021.

HB 1102, Joshua Kail (R-Beaver/Washington), would create the Keystone Energy Enhancement Act (KEEA). It is designed to encourage capital investment in Pennsylvania’s natural gas and manufacturing industries.

HB 1103, Jonathan Fritz (R-Susquehanna/Wayne), would expand Pipeline Investment Program grants. Manufacturers will have a significant competitive advantage in production costs and Pennsylvania communities will be able to attract new manufacturing enterprises with readily available access to natural gas.

HB 1104, Tarah Toohil (R-Luzerne), would require the Department of Community and Economic Development to establish a registry for abandoned manufacturing sites throughout the state. By establishing this registry, a one-stop shop for available industrial properties, the state is making it clear that PA is open for business and wants that business.

HB 1105, Eric Nelson (R-Westmoreland), would further incentivize businesses to remediate properties that pose health and safety risks to our residents.

HB 1106, Mike Puskaric (R-Washington/Allegheny), would reform the permitting process. Pennsylvania needs a regulatory and permitting structure conducive, not punitive, toward capital investment.

HB 1107, Tim O’Neal (R-Washington), would create an independent commission to deal solely with the DEP permit process. This means the DEP can focus on enforcing environmental laws.