America Works (On Misleading the Public)

America Works USA, an affiliate of the union-funded Democratic Governors Association, recently launched an ad campaign in support of Gov. Wolf’s effort to raise taxes on middle- and low-income people.

The group, bolstered by a war chest of at least $500,000, took to the airwaves with radio and TV ads slamming the Republican budget and touting Gov. Wolf’s budget as a practical alternative. Regrettably, the ads are chock-full of misinformation. Although the ads aren’t very long, we identified seven erroneous claims, each of which are corrected below.

Claim #1: The Republicans’ budget lets oil and gas drillers “of the hook.”

Reality: According to America Works, Republicans let the natural gas industry of the hook because they refused to impose higher taxes on the industry. Never mind gas drillers already pay taxes applicable to every other Pennsylvania industry ($318 million in taxes since 2009). They also pay an Impact Fee, which generated more than $800 million in revenue since 2011. According to the Independent Fiscal Office, the 2015 Impact Fee is equivalent to a 4.7 percent effective tax rate, placing drillers firmly on the hook.

Claim #2: The Republican budget proposal fails to fund education.

Reality: Putting aside the notion that more education spending produces better academic achievement (there’s no correlation), the Republican budget includes $370 million in additional spending on K-12 education. The budget vetoed by Gov. Wolf would have increased support of public schools to more than $10.4 billion—a new record high—for the 2015-2016 budget year.

Claim #3: The budget deepens the deficit.

Reality: Baked into the “deficit” number is projected increases in government spending. A real deficit is when government spending exceeds tax revenue. There’s no reason why lawmakers can’t slow the growth of spending and reform the cost drivers in the budget to ensure it’s balanced for next year. But if lawmakers must choose between prioritizing all spending and even use one-time revenues or raising taxes, the first option is preferable.

Claim #4: Gov. Wolf is fighting for a middle-class budget that lowers property taxes.

Reality: The governor’s budget raises taxes on Pennsylvanians of all income levels, according to the Independent Fiscal Office. The governor’s promise of property tax relief only provides 30 cents of relief for every dollar in new taxes—with a net increase of $1,400 per family of four—while simply shifting the tax burden and failing to address ballooning local pension payments driving up property taxes.

Claim #5: The governor makes oil and gas companies pay up to fund schools.

Reality: None of the proposed severance tax revenue is dedicated for education spending—though much of it is earmarked for other projects, including corporate welfare for alternative energy companies.
And according to the governor’s own estimates, his income tax and sales tax increases will cost taxpayers several times more than his severance tax. His proposal collects more funding from taxing health care services and day care than from taxing natural gas.

Claim #6: Pennsylvania ranks 44th in state support for education.

Reality: Pennsylvania ranks near the national average in state funding per student. Overall, Pennsylvania ranks 10th in total funding per student—at $15,000, which is nearly $3,000 above the national average. Moreover, total school district spending reached an all-time high in 2013-14, at $26.1 billion. State aid to school districts is also at a record high.

Claim #7: Pennsylvania is the only major gas producing state that doesn’t charge oil and gas drillers an extraction tax.

Reality: Pennsylvania has an extraction tax. It’s called an Impact Fee. Additionally, Pennsylvania has one of the highest overall tax burdens of all the oil- and natural gas-producing states. Other states, like Texas and Wyoming, do not have any personal or corporate income tax. Alaska uses its severance tax to give rebates to residents. Any apples-to-apples comparison must consider the total tax burden.