All Pennsylvanians Would Pay for Nation's Highest Severance Tax

Gov. Wolf proposed a natural gas extraction tax on Pennsylvania’s oil and gas industry to make drillers pay what union special interests dub their "fair share."

In testimony to the Pennsylvania Senate Environmental Resources Energy Committee and Finance Committee, CF's Nate Benefield explained the harmful impact the severance tax would bring to not just the oil and gas companies, but to all Pennsylvanians.

The Independent Fiscal Office projects that Pennsylvania families earning less than $100,000—who already shoulder some of the highest taxes in the country—would have to shell out an additional $180 million, largely through higher energy bills, because of the severance tax.

Rather than helping the middle class, the natural gas extraction tax would make their burden heavier.

Benefield notes that the industry paid more than $600 million in impact fee taxes from 2011 to 2013 and $318 million in other state taxes since 2009. Imposing an additional tax would have a detrimental impact on job growth. According to a STAMP model developed by the Beacon Hill Institute at Suffolk University, this severance tax would result in Pennsylvania having 4,000 fewer private sector jobs by 2017.

An Independent Fiscal Office testimony, also delivered yesterday found the effective tax rate under Gov. Wolf’s proposal would be 17.3 percent in the first year, given current prices. This would give Pennsylvania the highest severance tax rate—on top of existing taxes—among all states. It would give gas and oil companies less incentive to invest their resources in Pennsylvania, a problem for a state whose drilling industry currently ranks 56th out of 156 possible locations.