Taxation

Yesterday Pennsylvania Gov. Tom Wolf released his 2017 budget proposal. Twice before, Wolf has attempted to levy a severance tax Marcellus drilling in the state–in addition to the existing impact tax. A severance tax would cause drilling in the state to stop, by giving PA one of the highest severance tax rates in the nation. (Yes, drillers do have other options and will go to other shale plays!) However, in this new budget, Wolf is once again attempting to impose a severance tax–this time 6.5% (same as last year)–as a payback to the teachers’ unions that helped elect him. Wolf’s plan this year is to transfer away nearly $300 million from drillers and landowners, via a high severance tax, and give it to “education.” As soon as Wolf was done with his divisive budget address yesterday, top Republicans declared the severance tax plan dead–about as dead as Wolf’s fledgling reelection effort…
Read More “PA Gov Wolf’s New Budget Calls for 6.5% Severance Tax (Again)”

The organization that represents county governments in Pennsylvania, the County Commissioners Association of Pennsylvania (CCAP), has a message for Gov. Wolf and state legislators: Even if you pass a severance tax, keep the impact fee in place. It has, over the past five years, become critically important for all counties across the state–not just counties where drilling takes place (those “impacted”). Not only do counties want to maintain the impact fee in general, they specifically want to keep it as it is currently structured–how much drillers are taxed and how the revenue is split. The message loud and clear coming from CCAP: don’t screw with the impact fee, even if you want to (boneheadedly) add a severance tax…
Read More “PA Counties Say Keep Impact Fee, Even if There’s a Severance Tax”

Each year since 2012 Pennsylvania has assessed and collected their version of a severance tax–called an impact fee. As you can see from the chart, the first three years’ worth of collections were over $200 million per year. But starting in 2015 and the collapse of oil and natural gas prices, drillers laid down many of their rigs, and the gas slowed down–resulting in lower tax (whoops, fee) collections. Which is to be expected. In PA, the impact fee is collected and disbursed by the Public Utility Commission (PUC). However, a different state agency, the Independent Fiscal Office (IFO), analyzes production and does a pretty fair job of estimating what the collections will show. Last July the IFO made predictions for 2016 collections that range from $5 million to $56 million below what was collected in 2015 (see PA Independent Fiscal Office Predicts Impact Fee Revenue for 2016). With production numbers now updated by the PA Dept. of Environmental Protection, the IFO has re-run the numbers and now has a much better idea of what collections, which occur in April, will show. The IFO says the state will collect $174.6 million in impact fees, which is $13.1 million (~7%) less than last year. Perhaps most interesting is a number calculated by the IFO called the “Effective Tax Rate” (or ETR). The ETR is what the impact fee would be if it were called a severance tax. Last year the ETR was 6.9%. This year it will be 5%. When you add corporate income taxes paid by drillers to the ETR, you get a “severance tax” rate that is higher than any other oil and gas producing state! And still RINOs and Democrats want to tack on an extra severance tax. Blithering idiots…
Read More “PA IFO Predicts 2016 Impact Fee Revenue Will Drop Another 7%”

“As a dog returneth to his vomit, so a fool returneth to his folly.” (Proverbs 26:11, King James Version) We could think of no better way to convey the news that no less than three so-called Republicans from the Philadelphia area, and a plethora of Democrats, are in the process of introducing severance tax bills in the Pennsylvania State Legislature, once again. The bills range from assessing a 3.5% tax all the way up to 9%. We won’t repeat our many MANY arguments for why such a tax is just plain stupid. We’ll just share with you who (in the PA legislature) wants to steal money from landowners and drillers and give it to teachers’ unions…
Read More “RINOs and Dems Ramp Up Severance Tax Bills in PA Legislature”

Why doesn’t it surprise us that a Republican-in-Name-Only (RINO) State Senator from the 6th District (Bucks County, Philadelphia suburbs) is not only in favor of, but sponsoring a bill to levy a Marcellus-killing severance tax? PA State Senator Robert “Tommy” Tomlinson, an establishment lifer who has been in the state legislature since 1991 (first as a Representative, later as a Senator), sent around a “Co-Sponsorship Memoranda” yesterday asking Democrats, and along with any suckers from the Republican Party, to co-sponsor a bill he plans to introduce calling for a new severance tax on Marcellus drilling. Tommy wants to tax Marcellus drilling an extra 5%, on top of the existing impact fee, which is a severance tax under a different name, to give the money to (you guessed it) teachers unions. Tommy wants transfer millions of dollars out of the pockets of landowners and drillers and into the sinkhole of the failing “unfunded” pension system for state workers and teachers. The instantaneous effect of Tommy’s tax would be to kill all drilling in the state, which apparently doesn’t bother Tommy in the least…
Read More “RINO PA Senator from Philly Introducing 5% Severance Tax Bill”

Pennsylvania Gov. Tom Wolf is…what adjective can we use? Recalcitrant. Stubborn. Pigheaded. Stupid. Perhaps all of the above. Wolf is clearly in over his head and the most ineffective PA governor in more than a generation. When he assumed office in 2015, he floated a budget calling for a new 5% severance tax on the Marcellus industry–a tax which even his supporters admitted would be closer to 17% (see PA Official Admits Wolf Severance Tax Highest in Nation @ 17.3%). Such a tax would literally kill the entire industry. That budget deal was a disaster. Wolf held up the budget for nine months into the new budget year, and finally caved (see Hubris: PA Gov. Wolf Caves on Budget, then Claims He Won). Beaten but unrelenting, Wolf came back last year with yet another severance tax proposal–this time an astonishing 6.5% tax (see More on Wolf’s New 6.5% Severance Tax – What Could of Been). What a putz. Yes, he lost again. Republicans held firm and he dropped his demand. As we’ve chronicled repeatedly, Wolf insists on such a tax because of his quid pro quo payoff to teachers unions for their support in getting him elected. Sleazy. PA already has a higher tax rate on natural gas than other oil and gas producing states. PA has an impact fee plus a corporate income tax. The two together are, on average, higher than the severance tax rates in Texas, Oklahoma, Louisiana, Colorado and other o&g states. We’ve already seen big Marcellus drillers leave and go to other states. A severance tax will greatly reduce the amount of drilling in PA. So, it’s now Wolf’s third year and he is about to release another budget. And you will not believe it. This dolt is calling for a severance tax again! Third year in a row! But he won’t say how high of a tax, at least not yet…
Read More “PA Gov Wolf Asks for Severance Tax 3rd Year in a Row”

From the beginning of Pennsylvania Gov. Tom Wolf’s disastrous administration, we have told you the unvarnished truth: Wolf’s call for a high tax on Marcellus Shale gas production is a giveaway, a pay-back, to teachers unions for their support of him in defeating Republican Gov. Tom Corbett (see PA Gov Wolf Proposes Marcellus-Killing 7.5% Severance Tax). Wolf held up the first budget by nine months, wreaking havoc on the state, over this very issue–screw the Marcellus industry to give its money to teachers (i.e. for “education” and “for the children”). What a boatload of horse manure. As we’ve repeatedly SHOUTED–PA already has the equivalent of a severance tax. It’s called an impact fee plus a corporate income tax. When you take the two together, the average “tax” paid by Marcellus drillers is HIGHER than that paid in other big oil and gas states, like Texas and Oklahoma. Enacting an ADDITIONAL severance tax on top of it–even in place of it–would be a disaster, shutting down most Marcellus drilling. And yes, there is gas in other states and yes drillers will leave PA if such a tax is enacted. And yet unions, like AFSCME Council 13, continue to pedal lies about the severance tax…
Read More “Union (Once Again) Lies About PA Marcellus Severance Tax”

The Commonwealth Foundation for Public Policy Alternatives, commonly known as the Commonwealth Foundation or CF, is Pennsylvania’s free-market think tank. CF’s mission is simple: Transform free-market ideas into public policies so all Pennsylvanians can flourish. In a recent post on the CF blog site, the organization makes the strong case that although PA’s levy on shale drillers in the state is called an impact “fee”–it’s actually a tax. Quoting the Independent Fiscal Office (IFO), the CF post says, “the current impact fee is equivalent to a 6.9% severance tax–higher than severance taxes in Louisiana, Wyoming, and West Virginia.” Here’s what CF has to say about PA’s severance TAX…
Read More “Yes Virginia, There IS a Severance Tax in Pennsylvania!”