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Don’t Be Fooled, Pennsylvania’s Gas Industry Already Pays

severance tax - Doug Berkley ReportsDouglas Berkley
Noise Solutions, Technical Sales & Solutions
Publisher: Tri-State Shale Traveler

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If you think Pennsylvania’s gas industry doesn’t already pay taxes, you’re dead wrong. The Commonwealth has an existing impact fee that’s fair to everyone.

I have read several letters lately from across the Commonwealth where readers claim the energy industry isn’t “paying its fair share” here in Pennsylvania as they call for a new severance tax and disingenuously claim the industry isn’t taxed here.  Nothing could be further from the truth, a fact easily learned if they would just take the time to do a simple web search.

pennsylvania's gas industry

MD-PA-WV tri-point marker located on the Mason Dixon line about 1.5 miles SW of Markleysburg Pennsylvania. Photo by Jimmy Emerson, DVM. The monument was placed in 1910. The smaller marker was placed in 1967 by a local boy scout troup.

Our state has had an impact fee (essentially a tax) in place since 2012, and during that time has raised nearly $1 billion, mostly for the regions directly impacted by Pennsylvania’s gas industry, but also for every other county across the Commonwealth. These funds stay in local communites, where they should stay. They help those areas most impacted by drilling and energy-related activity directly.

Those impact fees have helped regions balance budgets, build new roads and bridges, add/upgrade parks, buy police cars and fire engines and much more.  And, these funds do get to areas not directly affected by drilling as well.  If these funds went to Harrisburg, I highly doubt these affected areas would see the benefit anymore.

Is the industry paying it’s fair share, though?  Are we really the only state not collecting funds from drilling activity?  Do the research for yourself and see firsthand. You’ll find this from Pennsylvania’s Independent Fiscal Office:

“Historically, the impact fee has translated into an average tax rate of roughly 2.0 to 4.0% on the market value of production. For 2015, the analysis projects an average tax rate of 4.7 percent, due to very low regional prices.”

This 4.7% rate happens to be exactly what West Virginia charges, but that state allows several credits against its tax rate, which means Pennsylvania’s impact fee will, at the end of day, likely produce a higher average tax than West Virginia’s for 2015. Governor Wolf said his plan was modeled after West Virginia, but we already have a tax in the impact fee that is able to produce more revenue at the low prices we’re now seeing. We have, on top of that, a corporate income tax that is one of the highest in the land at 9.9% versus West Virginia’s 6.5%.

See what I mean? Any idea that Pennsylvania’s gas industry isn’t paying its fair share is dead wrong. Don’t be fooled.

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