Why a Severance Tax is a Bad Idea

As lawmakers work on passing a state budget, one of Gov. Wolf’s top priorities—a severance tax on the natural gas industry—is being hotly debated.

Here are six reasons why a natural gas severance tax is a bad idea:

1. Middle class families and businesses will pay for it. Households earning less than $100,000 will pay $180 million more annually in higher utility bills as a result of Gov. Wolf’s proposal.
2. Jobs would be lost. According to a recent analysis, a proposed severance tax, with no other tax changes, would result in 4,138 fewer private sector jobs in fiscal year 2017.
3. We already have a severance tax. It’s called an impact fee, but it hampers the economy like a severance tax.
4. Gas companies already pay every single tax that businesses in Pennsylvania are required to pay. A severance tax would unfairly punish one type of industry in Pennsylvania to provide funding for legislative interests that have nothing to do with natural gas.
5. Any claims of the gas industry needing to pay their “fair share” are bogus. Gas drillers paid more than $800 million in impact fee taxes from 2011 to 2014 and $318 million in other state taxes since 2009. If these amounts don’t constitute a “fair share,” what does?
6. Punishing the gas industry with higher taxes punishes workers. Private sector labor leaders have bemoaned the reduction in man hours already under way. According to the vice president of the Laborers’ International Union of North America, “If you excessively tax the shale industry, you risk hurting employers, workers and communities across the state.”

In the end, a severance tax would hurt the very people Governor Wolf claims he is trying to help.