Governor’s ‘Restore PA’ Severance Tax Proposal Would Negatively Impact State Business Climate

From PA Chamber of Business & Industry

Pennsylvania’s energy resources are one of the state’s strongest competitive advantages. However, the continued threat of a severance tax threatens to reduce this competitive edge. Since the governor first took office he has continually called for such a tax and has offered various proposals on how revenues from a severance tax should be spent. That’s why we weren’t surprised – albeit disappointed since the state’s economy continues to show positive signs and revenue collections are hundreds of millions of dollars above estimate – when he unveiled his latest severance tax proposal the week before his budget address.

The governor’s latest plan calls for a severance tax to pay for his “Restore PA” proposal. This initiative would be funded at the offset by a $4.5 billion bond and paid back over generations through revenues from a severance tax. The program is dedicated to help fund various community projects throughout the state – including stormwater improvements, infrastructure development and brownfield clean-up. (It’s important to note that many of these types of projects are already being funded through the state’s impact tax.) While the PA Chamber agrees infrastructure development should be a priority, punitive energy taxes are not the best means to achieve this goal.

For the fifth year we are leading a coalition in opposition to the severance tax. Our coalition website has recently been updated with new messaging about the negative ramifications of the “Restore PA” initiative as well the benefits of a thriving natural gas industry. There are several reasons why we stand opposed to an additional tax on the industry. First, the current system of taxation is working and, according to the Forge the Future report, Pennsylvania could gain 100,000 new jobs and $60 billion in revenue if we allow the industry to fully harness our natural resources. Second, natural gas companies in Pennsylvania already pay among the highest Corporate Net Income Taxes in the nation, and tacking on another severance tax would make it easy for them to take their operations – and jobs – to another state in the shale play. Third, if government officials feel that the projects listed under the Restore PA initiative are of critical importance for the common good, it should not be on the back of one industry to pay for these projects. Lastly, despite the governor’s previous claim that what’s under the ground “belongs to all of us,” gas resources actually belong to property owners and it isn’t the government’s right to tax them just because they feel they can or should.

As part of our efforts to push back against the ill-advised “Restore PA” proposal, the coalition has held regional media conference calls over the past several weeks. These calls have featured energy leaders, county officials and local chamber or business representatives highlighting how each region of the state is positively impacted by the natural gas industry – including those in which no gas drilling takes place. Residents and businesses across the state have reaped the benefits of lower energy prices and an increase in the number of blue-collar manufacturing and construction jobs – as well as additional ancillary and down-stream production jobs – that have resulted from the growth of this industry. Additionally, every county benefits from the impact tax. When accounting for 2018 revenues, the state is on track to collect $1.7 billion from the impact tax since it was first implemented. This revenue is distributed to each county through a fair formula and has provided funding for important local projects throughout the state. Our local chamber partners have been critical in our advocacy efforts in fighting back against a severance tax and also in promoting how the current impact tax structure is benefiting local communities.

As this issue progresses into budget discussions, we’ll continue to drive these points home to lawmakers and the Wolf administration as we advocate for smart public policies that will drive jobs, revenue and key public projects to the Commonwealth.