For Immediate Release
February 11, 2015
HARRISBURG - The Pennsylvania Chamber of Business and Industry today expressed disappointment in Gov. Tom Wolf’s proposal to enact an additional tax on Pennsylvania’s natural gas industry. The proposed five percent severance tax would hamper the economic growth that has been a hallmark of the natural gas industry and has led to the creation of thousands of good paying, family sustaining jobs, in addition to lower utility bills for Pennsylvanians.
“The natural gas industry has provided Pennsylvania with clean, affordable energy; brought billions of dollars to our economy and the state’s tax collections; and created countless jobs,” said PA Chamber President and CEO Gene Barr. “The reality is that this industry is already taxed. Regardless of what tax proponents would have you believe, the impact fee is a tax and is paid in addition to other taxes, including Pennsylvania’s corporate net income tax which at 9.99 percent is the highest effective rate in the nation. Placing additional tax burdens on natural gas drillers won’t only drive them to other states that share our natural resources. It will lead to a decline in the ancillary and supply chain jobs that are helping our middle class thrive, which will cause us to lose our competitive advantage in the shale play.”
To date the impact fee – which is equivalent to a more than three percent severance tax – has brought in more than $630 million. Additionally, shale development and related activities have generated more than $2.1 billion in corporate, personal and other tax revenue. According to the Pennsylvania Department of Labor and Industry, the natural gas industry has resulted in the creation of more than 240,000 jobs in the Commonwealth.
Governor Wolf’s proposal is based upon the current five percent shale tax structure in West Virginia. As a direct result of West Virginia’s tax policy on oil and gas, the state never saw the number of jobs and increase in gas production – and subsequent lower utility costs – that Pennsylvania has experienced. Multiple press outlets have noted that it is extremely unlikely a five percent severance tax would generate anything close to $1 billion in revenue per year, which is the amount Gov. Wolf claims a severance tax will generate.
History has shown that placing additional tax burdens on the natural gas industry has had an adverse impact. Following the enactment of the impact fee in Act 13 of 2012, the amount of rigs in Pennsylvania dropped from 114 to 55. A new severance tax will likely lead to more rigs leaving the state and a loss of jobs for the Commonwealth in both core and ancillary industries.
“It is interesting that the Governor made his announcement today in a school district that has had to repeatedly raise taxes in recent years to deal with pension costs,” Barr said. “If we really want to tackle our state’s budget shortfall, the answer isn’t to impose high taxes on our fastest-growing industry – it’s to address huge cost-drivers like the pension debt and focus on developing infrastructure that will secure Pennsylvania’s position as an American hub of energy and job growth.”
The Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its statewide membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.