Tax Proposal and Pennsylvania Prosperity

August 9, 2017

As the debate picks up in Pennsylvania over a proposal to hike taxes on natural gas production, a few numbers stand out:

  • 322,600 – Pennsylvania jobs supported by natural gas and oil activity in 2015, according to a recent study by PwC. These include direct industry jobs and also jobs in the wholesale/retail, construction, manufacturing and other sectors. 
  • $44.5 billion – Value added economic impact – basically, the contribution industry made to Pennsylvania’s economy.
  • $23 billion – Wages paid to individual Pennsylvanians in 2015 because of natural gas and oil activity. These are paychecks: food on the table, mortgage payments, clothing, transportation and more.

(see Fuel Pennsylvania Infographic)

As if all of these contributions weren’t enough, energy companies also have paid more than $1.2 billion to the commonwealth in impact fees since 2011.

Total up industry’s economic contributions to Pennsylvania – helping to support its schools, first-responders, local infrastructure and jobs, lots of them – and it’s a pretty fair amount. But not fair enough for some.

Last month a narrow majority in Pennsylvania’s state Senate voted for a $600 million tax increase that would hit natural gas producers and natural gas and electric users while also hiking taxes on communications services – all of which could significantly impact Pennsylvania consumers. The tax hike simply runs counter to sound economic principles and basic logic – and could hinder the energy development that produced all of the numbers noted above. Stephanie Catarino Wissman, API-PA executive director, joined a number of voices this week in speaking out against the proposed severance tax: 

“The Senate’s action places Pennsylvania at a competitive disadvantage for new investments for natural gas development and makes manufacturers and employers less competitive. Rather than offering proposals that could harm consumers and diminish Pennsylvania’s competitiveness, our elected officials should look at ways to promote public policies that expand Pennsylvania’s opportunity to thrive and position our families to succeed. Bottom line, does Pennsylvania want investment here or elsewhere?  The choice should be clear.”

The choice is crystal clear: Pennsylvania can continue to be an energy powerhouse with policies that support safe and responsible development, or it can commit the unforced error of imposing a tax hike that could harm production and the revenue streams that are so valuable to the commonwealth and local governments.

Others expressed opposition to the tax proposal, which essentially would tax natural gas four times: for every well drilled through impact fees, during production with the severance tax, at consumption with taxes on gross receipts and every year with business and income taxes on any company involved in drilling, moving or using natural gas. Gene Barr, Pennsylvania Chamber of Business and Industry president and CEO:

“Of Pennsylvania’s competitive business advantages, affordable, accessible energy – particularly natural gas – perhaps stands out the most. This revenue package would attack that advantage by imposing additional punitive taxes on the natural gas and electricity use … If we truly want our economy to flourish, state officials need to enact pro-growth policies that will encourage job creation and entice companies to come to Pennsylvania and stay here – which will in turn generate more revenue for the state.” 

Indeed, these costs, along with the proposed tax increase on phone use, could reduce state businesses’ competitiveness and their ability to re-invest in the commonwealth, with potential impacts for consumers.

And Mark Chasse, Industrial Energy Consumers of Pennsylvania:

“Our members provide 35,000 manufacturing and support jobs throughout the Commonwealth. Additionally, IECPA members invest an estimated $312.5 million each year into their Pennsylvania facilities – supporting additional jobs and adding to the commonwealth’s tax base. However, the proposed taxes in H.B. 542 put this growth and investment at risk. If signed into law, this revenue package would cost IECPA members up to $4.1 million annually – significantly impacting their ability to compete. These targeted energy tax hikes would increase the cost of doing business in Pennsylvania …”

As we pointed out before, safe and responsible energy development has been good for Pennsylvania and individual Pennsylvanians – supporting jobs and boosting economies at all levels. As the PwC numbers for Pennsylvania show, natural gas and oil make broad economic contributions that go well beyond the industry itself. Our companies already pay their fair share and more in taxes and fees. Targeting a productive industry for higher taxes is bad economic policy, bad for Pennsylvania and bad for Pennsylvanians.

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