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From Gene Barr, President, PA Chamber of Business & Industry
As we approach the end of the year, the 2017-18 budget has finally been completed. In late October, the governor signed into law a revenue package to balance the $32 billion spending plan that had gone into effect in July. After months of a protracted back and forth, lawmakers came to an agreement on a revenue deal that relies largely on borrowing against the state’s Tobacco Settlement Fund; one-time fund transfers; expanded gaming; a fireworks tax and requiring online vendors to remit sales tax. Noticeably absent from the deal was a slew of proposed tax increases that could have significantly impacted the Commonwealth’s business climate.
Throughout this year’s budget process, the PA Chamber has been strongly advocating against punitive taxes that single out specific industries and hurt the Commonwealth’s overall competitiveness. This year, thanks to the help of our local chamber partners, the PA Chamber successfully fought back against more than $1 billion in proposed taxes that would have negatively impacted the Commonwealth’s business community and hard working families. Given the financial difficulties the state has found itself in over the past few years, the proposed taxes elected officials were considering were constantly evolving. Over the course of the elongated nine month budget negotiation process, the PA Chamber pushed back against numerous proposals – including: instituting combined reporting; a commercial storage tax; a hotel tax; a technology tax; and an increase to the insurance premiums tax. We also stood up against multiple attempts to enact higher energy taxes on Pennsylvania residents and businesses – including a proposed new tax on natural gas users; and increased taxes on energy and phone bills. And, we again spoke out against and eventually defeated efforts to increase the minimum wage to $12 an hour – a short-sighted move that especially hurts small businesses and makes it harder for low-wage workers to get their foot in the door.
Yet, despite the fact that a revenue package has been signed into law, there continue to be calls by some lawmakers to place an additional punitive tax on the Commonwealth’s natural gas industry. We have repeatedly warned lawmakers against this misguided policy because it will negatively impact the state’s overall business climate – further slowing Pennsylvania’s already stagnant economy.
There is a slew of misinformation regarding how Pennsylvania taxes the industry and if the industry is paying its “fair share.” Tax proponents often use the argument that Pennsylvania is the only state without a severance tax. However, Pennsylvania is also the only state to impose an impact tax on the industry. Since it was enacted, the impact tax has brought in more than $1 billion with revenues distributed to every single county in the Commonwealth to help fund critical local projects. Also, it’s important to note that the Commonwealth’s overall tax climate is more burdensome that other states with shale drilling. In fact, Pennsylvania’s Corporate Net Income Tax has the highest effective rate in the country. To say that the Commonwealth is letting drillers off the hook because we haven’t placed yet another punitive tax on this industry is comparing apples to oranges – especially since some drilling states don’t even impose a Corporate Net Income Tax.
Another fallacy is that the industry has to stay in Pennsylvania because the gas is here. But capital is fluid and companies will move capital if they are not able to be profitable in a certain location. For those that believe this will happen, all you have to do is look at the drilling counts – which have already seen a decline. Additionally, Pennsylvania’s burdensome regulatory and permitting climate place additional hardships on natural gas related companies that want to come and invest in the Commonwealth. The last thing we should be doing is singling this industry out by adding another punitive tax that will serve to make the Commonwealth even less competitive than other states in the Shale play.
As we repeatedly told lawmakers throughout the budget process, we cannot expect our economy to prosper if we continue to look to short-term solutions and target specific industries to solve our budgetary problems. Instead, we need to embrace tax policies that focus on our long-term economic future and entice new investment. By creating a competitive business climate, more job creators will be enticed to stay and locate in the Commonwealth – which will then generate more revenue for the state.