Shepstone Management Company, Inc.
Pennsylvania House Speaker Turzai provides a comprehensive statement on Restore PA, Gov. Tom Wolf’s plan to put a severance tax on the natural gas industry.
Mike Turzai is the savvy leader of Pennsylvania’s House of Representatives. Speaker Turzai, in fact, has thwarted the worst excesses of the Wolf administration keeping Pennsylvania’s trust-funder in chief from enacting a job-killing severance tax on top of the Marcellus Shale impact fee the Commonwealth already has. If Tom Wolf had his way he’d tax the natural gas industry out of existence, not so much because he hates it as because he’s not bright enough to understand his proposals would give us the highest severance taxes in the land, steal from landowners and drive the industry elsewhere. Speaker Turzai is now battling him yet again.
Here is exactly what Speaker Turzai had to say with his excellent statement:
In January 2019, Gov. Wolf first outlined his Restore PA proposal: a $4.5 billion, debt-financed slush fund to be allocated at the whim of a new government board and paid for by yet another job-killing tax on the natural gas production industry.
Since his initial proposal, Gov. Wolf has embarked on a very public and campaign-style tour of the Commonwealth, promising communities a laundry list of new infrastructure projects conditioned on the General Assembly enacting his long sought-after severance tax. To top it off, the governor recently suggested that the severance tax could also help reduce Pennsylvania’s Corporate Net Income Tax (CNIT). That’s a lot of promises to keep with a finite and unpredictable source of tax revenue.
This week, nearly five months after the governor announced Restore PA, and just a few weeks before the General Assembly must pass a budget for next year, the governor plans to finally introduce his legislation. Unsurprisingly, almost all the legislative support is among House or Senate Democrats, further demonstrating their party’s desire to recklessly borrow money and to tax employers in order to repay it.
Let me be clear; infrastructure investment is critical to the ongoing success of Pennsylvania’s economy. The House Republican Caucus supports investments in transportation infrastructure, rural broadband, stormwater management, brownfield clean-up and other worthy infrastructure needs. No one disagrees with the value of these projects. House Republicans do, however, have serious issues with the governor’s irresponsible, anticompetitive, and likely insufficient proposal to pay for them.
Debt That Would Cripple the Commonwealth
We must be clear about what Restore PA really is: $6.5 billion of new debt to burden the next generation of Pennsylvanians. That is a low estimate of the full cost, with financing, of Gov. Wolf’s planned $4.5 billion bond issue. And the true cost could be even higher, if interest rates rise, if severance tax revenue falters, or if Pennsylvania’s credit is downgraded.
As Speaker of the House, I have led the effort to reduce the burden that the Commonwealth’s debt places on Pennsylvania taxpayers. Over the past 10 years, we have increased annual state contributions to the School Employee Retirement System by over $2 billion. We have lowered the state’s RACP debt ceiling by $1 billion. And we have reformed the public pension system to limit the risk that future Pennsylvanians will suffer under an unmanageable pension debt.
Still, as the current economic expansion becomes the longest in American history this month, we have a great deal of work to do to ensure that Pennsylvania’s finances are as healthy as the taxpayers of this state deserve. This is not the time to go even deeper into debt, or to further mortgage the future of the Commonwealth to provide Gov. Wolf with a slush fund to ride out his term.
A Better Solution
House Republicans believe that our infrastructure needs can be funded under existing programs and by the private sector, if only we can remove governmental barriers to those capital and infrastructure investments. That is why I joined several of my House Republican colleagues to propose the Energize PA program, a package of legislation designed to stimulate billions of dollars in private sector infrastructure investment and other capital projects throughout the Commonwealth. Energize PA would require minimal public expenditure, rather than several billion dollars in debt spending. Most importantly, Energize PA would help unlock our state’s full industrial potential, stimulating potentially tens of billions of dollars in additional economic activity, and providing thousands of family-sustaining jobs in the construction and trades industries.
We recognize that our natural gas industry already pays its fair share of taxes and has provided an economic lifeline to many struggling families, towns and counties in our state. The natural gas impact fee has already generated $1.7 billion in revenue since 2012, far more than is generated by traditional severance taxes in our neighboring states of Ohio and West Virginia. Natural gas producers and landowners have also paid an additional $5 billion in income tax since the Marcellus shale boom began. No other industry is singled out with a specific tax on their activity. Where the banking and insurance industries have industry-specific taxes, they do not pay business income taxes. Why would we attack the natural gas industry so directly?
Unlocking the Potential of Natural Gas
Pennsylvania has already benefited immensely from the boom in natural gas extraction, and House Republicans are dedicated to building on those gains rather than endangering them.
Residential natural gas customer costs have fallen over the past 10 years, for a $1,200 annual savings per household. Along with reduced electricity costs, Pennsylvania families have saved a cumulative $16.2 billion on their utility bills since 2008, largely thanks to increased natural gas production.
Tens of thousands of well-paying, family-sustaining jobs have been provided by the shale boom, with billions of dollars in industrial investment to capitalize on the lower cost of energy and the manufacturing potential of natural gas. The Shell cracker plant in Beaver County is a prime example, but the benefits spread throughout the Commonwealth.
Natural gas has allowed our state to excel in reducing its carbon dioxide emissions, with a 30% reduction between 2005 and 2015, while increasing our electric grid diversity and reliability.
The list goes on.
All of these achievements were accomplished without the need for taxpayers to underwrite a redundant government program. And they were all private sector driven.
In short, the imposition of a redundant severance tax on natural gas producers would undermine the enormous economic and environmental contributions of natural gas. It would deter additional infrastructure and capital investments, and it would kill jobs. It is an age old and long-established maxim that, if you tax something, you will get less of it. And yet, perhaps that is precisely what our Democratic governor and his allies in the House Democratic Caucus intend with his proposed severance tax: to make natural gas more expensive to produce, to deter fracking and to chase it out of Pennsylvania, as New York has done.
The governor has stated that he supports the natural gas industry in Pennsylvania, yet he also agreed with his fellow Democratic governors of New Jersey, New York and Delaware to impose a moratorium on drilling in the Delaware River Basin. That is certainly not illustrative of a governor who supports the ongoing production of natural gas in the Commonwealth, nor is his proposal to impose an additional, industry-specific tax on natural gas producers.
Can’t say it any better than that. Thank you, Speaker Tuyrzai!
Here also is Speaker Turzai offering the alternative to “Restore PA,” which, of course, is “Energize PA.”