PA Lt Gov Cawley Addresses Severance Tax in Chat Session

On Monday, Pennsylvania Lt. Gov. Jim Cawley, the head of Gov. Tom Corbett’s Marcellus Shale Advisory Commission, did a Q&A session via text chat with readers of the Philadelphia Inquirer to answer questions about the final report of 96 recommendations filed by the Commission and about the work they performed to arrive those recommendations. The questions covered jobs, taxes, regulation, pollution and more. Among the Q&A was this excellent exchange on taxes that puts to bed the widespread misunderstanding that the drilling industry is not paying taxes and “if only PA had a severance tax it would solve the budget problems in the state”:

Question:
I am confused by the no tax stance. Since we have the gas, it lies within our state, can the companies pick up and go somewhere else? The commodity is here, it is ours, if we start taxing the companies that doesn’t mean the companies leave. They can’t. Rather than letting them exploit us, don’t we have a chance to maximize our return. Isn’t it in the best interest of the most people to tax the companies?

Lt. Gov. Jim Cawley:
We ARE taxing the industry – to the tune of $1.2 Billion over the last few years. This revenue goes to fund your schools, your parks and your roads, to name a few. If you consider the tax structure of other states vs. Pennsylvania’s, I invite you to do so, what you will find is that PA has one of the highest corporate net income taxes in the country and is one of the few states that charges the net income tax AND a capital stock and fanchise tax. The industry IS paying taxes.

Question:
The gas is here and these companies are making record profits. Why would the Gov’s commission recommend such a weak impact fee when PA’s secondary and higher education institutions are seeing cuts and increases in tuition?

Lt. Gov. Jim Cawley:
Gov. Corbett and I inherited a state budget with a $4.2 billion deficit. One of the largest in state history. You suggest that a severance tax would solve this crisis. Last year, the legislature considered a severance tax. Had it passed, it would have been one of the most aggressive severance taxes in the nation. It is widely believed that this tax would have raised $200 Million dollars this fiscal year. You have just solved the ".2" of our "4.2" problem.

Read the entire text chat transcription here:

Philadelphia Inquirer (Aug 8, 2011) – Chat with Pa.’s lieutenant governor on the Marcellus Shale report