The latest media narrative this week seems to be that Americans for Tax Reform’s Grover Norquist is controlling Pennsylvania lawmakers, by stating that a proposed “impact fee” is a tax—see Angela Coloumbis’s story (with Laura Olson), Robert Swift’s story, Laura Vescey’s op-ed, blog posts from Scott Detrow, Politics PA, and Laura Olson, and John Micek’s interview with Norquist himself.
But it really isn’t just a matter of opinion, there are legal differences between a “tax” and a “fee”, and lawmakers’ oaths are not to Grover Norquist, but to the voters that elected them.
Despite being labeled as an impact fee, there are many reasons why SB 1100 more closely represents a tax than a fee. According to legal precedents, a fee is limited to the costs of a specific service rendered by a government entity, and the fees benefit the fee payer.
With those definitions in mind, let’s examine provisions in SB 1100:
- The impact fee is not tied to any specific service rendered, but would fund a myriad of programs supposedly “directly and indirectly” tied to natural gas drilling.
- SB 1100 distributes funds to local governments that can be used for a variety of specified purposes. Among these purposes is “tax reductions, including homestead exclusions.” Offering tax rebates for homeowners or other individuals is not a service rendered to gas drillers.
- The lion’s share of state funds collected would fund programs within the Commonwealth Financing Authority. Since its creation, the CFA has been used to fund a variety of lawmakers pet projects, and do so off-budget. The CFA programs to be funded by this impact fee seem very similar to “Growing Greener”—a program set to expire that has no direct connection with gas drilling.
- The fee is not flat, but increases with production and natural gas prices. It’s unlikely that the cost of the service provided or even the impact of Marcellus Shale drilling is higher for more productive gas wells.
But whether SB 1100 represents a “fee” or a “tax” is of secondary importance to whether it represents a good public policy. Individuals and corporations should pay for their impact and the government they use, but redistributing wealth is neither good tax policy nor economically beneficial.
A farmer in Tioga County, recently told the Marcellus Shale Commission that she would support an impact fee-but only if it does not reduce the level the industry is working to improve local infrastructure. “I see the roads being repaired in a much more timely fashion with the companies taking care of it, and in ways that our townships can’t necessarily cope,” she said.
The natural gas industry has shelled out $200 million, almost twice what the impact fee is expected to collect in 9 months, just to repair roads during 2010. In other words, it looks like drillers are paying more now than they would under the proposed impact fee.