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Problems With Patriot-News Eds on Severance Tax

The Patriot-News editors seem to think Pennsylvania is a “laughing stock” for its failure to enact a natural gas severance tax.  I can’t say I’m 100% philosophically against any sort of severance tax or local impact fee (– “po-TAY-to” / “po-TAH-to”) for a demonstrated, genuine economic externality that is not addressable by current law, and is unique to gas extraction, but the editors have been particularly lazy in their arguments.  They attack “special interests” without considering the fact that they are proposing a “special” tax.

P-N Eds:

As if anyone in Pennsylvania needs a reminder, we are the only natural gas producing state that does not have a severance tax.

So what?  (If your friends all jumped off a bridge…)

P-N Eds:

In Pennsylvania, our legislative leaders decided not only to continue to allow drilling (including in our precious state forests), but to give away our natural resources for less than any other state.

The lowest cost state should receive a disproportionate amount of investment.  Sounds to me like it’s a good idea to be the lowest cost state.  (We already know that “political problems” impeded gas exploration under Governor Ed.)  And of course, by “give away our natural resources”, we mean “collect leasing fees” and other taxes incurred in the normal course of business.

P-N Eds:

For the record, passing this severance tax is about a lot more than simply helping to fill the state’s budget hole — estimated to be $5 billion next year — as Republican gubernatorial candidate Tom Corbett claims.

Actually, budget revenue should be ZERO percent of the reason for any severance tax.  The editorial board seems to leave room for the claim that just because somebody is going to make money, that the state is entitled to confiscate some of that money above and beyond what the energy companies would pay in normal business taxes.

P-N Eds:

It is about ensuring Pennsylvania’s picturesque landscape and communities are not unduly burdened without any financial recourse. It is also about ensuring that gas drillers — most of which are multibillion-dollar corporations — pay their fair share for taking a resource that belongs to all Pennsylvanians.

Again, the energy companies are paying leasing fees.  If they should happen to sully the landscape, there is already legal recourse against developers.

Only that gas which is under state land “belongs to all Pennsylvanians”, and the state is being compensated in the form of leases.  Gas found under private land doesn’t belong to all Pennsylvanians, but to those who own the mineral rights to that land.  And even in the case of private land development, the state still gets to tax the sale or lease transaction as it would any other business.

Show me a genuine economic externality (– not the phoney-baloney stuff that’s been making most of the headlines) that is not addressable by current law, and that is unique to the gas industry, and I’ll support a gas tax/fee, and only insofar as the money never goes through Harrisburg and only addresses economic externalities from gas.

Otherwise, I’m all in favor of being the lowest cost, lowest taxed state for natural gas.  It is the high-tax states we should consider laughing stocks.

April 25, 2011 at 3:45 pm
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