Why Taxing Natural Gas Won’t Solve PA Budget Woes

Here is a letter I sent in to the Scranton Times Tribune (a slightly edited version was printed today) on the proposed natural gas severance tax and the Pennsylvania State Budget:

A recent article (June 5) highlights the Pennsylvania Budget and Policy Center – a project of the government employee union-backed Keystone Research Center – for counting the tax revenue “lost” because Pennsylvania does not apply an additional tax on natural gas extraction.  But it seems awfully convenient when a lobbying group that the Rendell administration directs citizens to support offers their wholehearted support of Rendell administration policy proposals.

The $54 million they suggest the Commonwealth would have collected over the last nine months for a natural gas severance tax would not be enough to cover even half of the $180 million Pennsylvania state government spends every day of the year.  It would not cover a fraction of the $1.5 billion provided under Gov. Rendell in grants, loans, and tax breaks for alternative energy companies. In fact, it would not even cover the $75 million Film Tax Credit – which exempts Big Hollywood from the taxes natural gas companies already pay.

More importantly, rather than simply looking at what government would have lost, consider what the state has gained.  A recent Penn State study estimates natural gas drilling created 44,000 jobs in Pennsylvania in 2009, while most of the private sector shrank. Pennsylvania has seen a 225% increase in drilling since 2008, while states with a severance tax have experienced a decline.  Instead of looking to punish job creators in a tough economy, legislators should look to reduce the cost of doing business in Pennsylvania by reducing out-of-control state spending.