A Severance Tax is Just the Beginning

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The push for a severance tax on natural gas production has all the attention right now because it’s a major piece of the budget negotiations, but the past week has also sent us several reminders that there is much more work to do even after that tax passes.

Before we get to that though, here’s how crazy low Pennsylvania’s effective tax rate on gas drilling is. No wonder southeast and south central Republicans were even running on raising it.

Conservatives want to say that this isn’t interesting because Pennsylvania has a higher total tax rate than these other states, but that’s a non-sequitur. Even if you think Pennsylvania’s overall public sector should be lower, this doesn’t refute the argument that natural gas taxes should make up a larger share of whatever size budget we’re looking at.

People currently care about this issue because there’s potentially money for their other budget priorities in play, but the Wolf administration and environmentalists in the legislature also need to be paying attention to the pollution angles.

Three gas companies were just hit with fines for methane gas migration into PA residents’ drinking water, and there are other chemicals proliferating unchecked out there.

Weak federal and state regulations mean “toxic waste materials such as benzene and mercury that are produced by the fracking boom of the last 10 years…are still classified as non-hazardous waste which includes household trash” according to a constellation of environmental groups who are considering suing the EPA.

The federal government is making moves toward regulating methane–one of the most potent greenhouse gases–released into the air during gas extraction, but it wouldn’t cover emissions from existing sources.

That’s all just to say that there’s plenty of scope for more aggressive state-level action from the Wolf administration after the severance tax gets passed, and plenty of political space out in the electorate to accommodate a more ambitious agenda of environmental regulation. And that space can be enlarged further, as starting the conversation about some of these other regulatory goals shifts the political goal posts even further out, making more room for action on the severance tax.

This entry was posted in Budget, Energy, Environment, Issues.

One Response to A Severance Tax is Just the Beginning

  1. The percent of the budget that other states get from severance tax is meaningless because it relies on three things Pennsylvania can’t control. How much those other states produce, the tax rate and the size of their budgets. It is also taking into account severance taxes on all fossil fuels in other states except it specifically says just wellheads for PA seemingly excluding oil and coal production.

    Didn’t the Non-Partisan Fiscal Office say the effective tax rate was 4.2%? So how is that disparity accounted for?