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Lincoln Institute


An End to Golden Eggs

by Beth Anne Mumford,
PA State Director, Americans For Prosperity
 

The "Marcellus Shale" formation has been a boom for Pennsylvania's otherwise stagnant economy. It currently supports 250,000 Pennsylvania jobs, and wages in affected industries like natural gas extraction are nearly double our state's industrial average. These higher wages have poured back into local economies, spurring the economic growth that our state so desperately needs.

Which makes Gov. Wolf's new energy tax proposal all the more baffling.

In order to fund his blowout in state spending, the governor is demanding a "severance tax" of 5 percent on all natural gas extracted from our state plus a flat fee of 4.7 cents per thousand cubic feet produced. Gov. Wolf estimates this will cost Pennsylvania natural gas producers up to $1 billion every year, blighting one of our state's few economic bright spots since the 2008-09 recession.

State legislators should reject the governor's demands. An energy tax will result in less business investment in our state, fewer good-paying jobs and a higher cost of living for millions of Pennsylvanians already struggling to get by.

One recent example perfectly illustrates how this new tax will harm businesses investment and job opportunities. Natural gas producer Huntley ~Huntley Energy Exploration recently made a 90-acre lease offer to Harmar Township in Southwestern Pennsylvania that would have paid $3,500 per acre plus a 15 percent royalty on everything that was drilled–a massive boon for local residents.

Then Gov. Wolf introduced his new tax plan. The company withdrew its offer in February, citing the energy tax as a primary factor in its decision. The final result is lost revenue for the township, lost jobs that would have been created and lost income for a local economy.

The governor's energy tax will also raise the cost of living for millions of Pennsylvanians. While natural gas producers will bear much of the tax's burden up front, a portion of it will be passed along to consumers in the form of higher prices.

This will have a two-pronged effect. First are higher electricity bills. We currently produce 25 percent of our electricity from natural gas, a number that is likely to climb in the years ahead. By raising the cost of natural gas through higher taxes, Gov. Wolf's plan is all but guaranteed to raise our utility bills.

The second effect will be higher prices for many everyday goods we buy. From groceries to clothing to school supplies, natural gas is frequently used to turn raw materials into the finished good. By raising the cost of production of these products, we'll end up paying more for them at the store.

Gov. Wolf tries to obscure these harmful effects with a healthy dose of spin and misinformation. State lawmakers — and their constituents — shouldn't buy it.

The governor's primary claim is that Pennsylvania is the only top natural gas producing state that doesn't tax drilling. But this completely ignores several critical facts.

Pennsylvania natural gas producers already pay among the highest taxes in the country. Harrisburg imposes a 2.3 percent "impact fee," which mirrors Gov. Wolf's proposed energy tax, and which has cost Keystone State natural gas producers $630 million over the last three years. It also ignores that at 9.99 percent, Pennsylvania has the highest corporate income tax rate of the top 13 natural gas producing states.

All told, Pennsylvania natural gas producers face the 10th highest total state and local tax burden in the country. Charging them even more would only further harm their ability to create jobs, grow wages and help our state's economy.

This is what happens when politicians like Gov. Wolf propose blowouts in government spending–you and I end up footing the bill. Rather than raising taxes and killing our jobs, Gov. Wolf should focus on identifying waste and misspent public funds that will help us live within our means. A new energy tax is simply unnecessary and it should be stopped without delay.

I'm Beth Anne Mumford state director of americans for prosperity Pennsylvania. Find out more at www.afppennsylvania.com.


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