No Doubt About it: PA has a Severance Tax

What do Christmas festivities, a new office building, and a Ford Explorer have in common? They were all paid for with impact fees on natural gas, raising doubts about the necessity of imposing higher taxes on the industry.

A recent audit of local government spending revealed some officials aren't prioritizing the costs related to natural gas drilling or, worse, the expenses associated with drilling were exaggerated from the beginning.

Back in 2012, when the impact fee was being implemented, we questioned the need for more revenue to offset the local costs of natural gas drilling:

Much of the revenue generated through Act 13 isn't used to address drilling impact—Marcellus Shale isn't responsible for deteriorating bridges and parks in midstate counties where drilling doesn't even occur. Act 13 sustains unrelated programs such as Growing Greener and is littered with corporate welfare like subsidizing rail freight assistance and natural gas vehicles.

The Auditor General's report is proof that such questions were well warranted. It's now clearer than ever that the impact fee is addressing far more than drilling impacts. It is clearly a tax.

Instead of debating the wisdom of the current impact fee (tax), Governor Wolf and others continue to push for an additional natural gas tax. Yet, the IFO estimates the current impact fee is equivalent to a 6.9% severance tax—higher than severance taxes in Louisiana, Wyoming, and West Virginia.

With natural gas prices still climbing from record lows and the industry shedding a third of its jobs in 2016, this audit should put a final nail in the severance tax coffin. Any further effort to raise energy taxes would be a transparent attempt to balance the budget on the backs of working people.

As we've seen, raising niche taxes to fill budget holes is a losing strategy. Only six months ago lawmakers passed new taxes on digital downloads, vape shops, and cigarettes. The result? A estimated $524 million budget shortfall.

Let's avoid repeating our mistake and acknowledge the truth: imposing an additional tax on one industry will do nothing to help solve the state's budget problems.