Saccone: No Severance Tax
There is a renewed effort by "tax-everything" proponents and their ilk to offer an extraction tax on the Marcellus Shale gas industry as a panacea to the budget shortfall we are experiencing in Pennsylvania.
Fortunately for the economic future of Pennsylvania, cooler heads have so far prevailed.
The extraction tax is one of the most demagogued and misunderstood issues facing the Legislature today. Most citizens don’t realize the industry is already taxed in the form of an impact fee.
That fee generates over $200 million in revenue each year and growing. Additionally, the industry paid $1.4 billion in state taxes and fees in fiscal year 2012.
Though some people think additional taxation makes sense, it actually would be a job-killing economic policy.
To spur economic growth, we must position Pennsylvania to welcome businesses, not continue to drive them away.
Proponents cling to it because it is their default solution for just about every revenue shortfall. Citizens are deluged with misinformation ignoring how much this industry contributes to the economy.
Here are some facts:
Marcellus drillers contributed well over $35 billion in capital investment and have paid in excess of $5 billion in royalties to landowners. In 2012, the industry employed more than 60,000 Pennsylvanians, providing more than $5 billion in wages.
Those jobs average over $80,000 a year and generate a sizable amount of personal income tax (PIT). Realize, PIT accounts for 41 percent of state revenues. Without those jobs, our budget would be in even worse condition.
More workers mean more revenues for the state.
Often overlooked, the industry contributed nearly $300 million in property taxes to local governments, helping fund important projects in the communities in which we live.
The present way we tax the industry via the impact fee keeps the raised revenue in the affected communities where it belongs.
The mechanism proposed by those who want an extraction tax would foolishly send the money to Harrisburg, where it potentially could be squandered on pet projects. Remember the fiasco of the casino revenues?
Once money comes to the Capitol, it produces a feeding frenzy, and politicians are always eager to find ways to spend it.
Most people are unaware that drilling requires great investment at considerable risk.
Think of every well as a nearly $6 million construction project boosting a local economy while adding revenue to neighboring municipal coffers and businesses in various ways.
Taxes discourage investment. A single drilling company I know invested over $800 million in the state last year and is considering another $900 million investment this year.
Some have the misperception that ours is the only game in town. Marcellus is one of the largest natural gas deposits, but make no mistake, it is only one of about 20 deposits across the country with even more in Canada.
Drilling for gas is an investment that without an acceptable return will not draw investors needed to grow the industry.
Others argue that Pennsylvania is the only drilling state without an extraction tax. This is a half-truth, failing to mention that we have other business taxes not found in competing states. For example, Pennsylvania has one of the highest corporate tax rates in the nation.
To spur economic growth, we must position Pennsylvania to welcome businesses, not continue to drive them away.
While an extraction tax would drive investment away, the impact fee has contributed to high- paying jobs to our Commonwealth and helped bring down unemployment from 8.7 percent to 5.7 percent in only a few years.
What you tax, you get less of, and instituting a tax in hopes of generating revenue for the state’s General Fund is bad policy.
The jobs created from natural gas stretch far beyond actual drilling. A small specialty company in my district grew from a two-employee operation to a 52-person operation because of the Marcellus Shale.
Proctor & Gamble is a wonderful success story worth retelling. The soap giant considered moving its operations out of Mehoopany Township in eastern Pennsylvania to Georgia until realizing the low cost of natural gas under its own property could help power its factory of 2,400 employees and lower costs.
It ultimately relocated part of its Georgia operation to the Commonwealth, adding another 300 jobs.
Our budget woes are rooted in overspending. A bloated state pension system and automatic pay increases negotiated in state contracts are the heart of our deficit.
If we follow through with business incentives, subsequent budgets will sustain themselves through a growing economy, an economy buttressed by an expanding clean energy that creates good-paying jobs.
State Rep. Richard Saccone, a Republican, represents the 39th District, covering parts of Allegheny and Washington counties. Visit RepSaccone.com or Facebook.com/RepSaccone for the latest legislative updates.
