On March 18, in the PowerSource section, the Post-Gazette published a guest column whose authors included Sharon Ward of the left-leaning Pennsylvania Budget and Policy Center (“Let’s Take a Common Approach to Shale Taxation”), advocating for a standard severance tax rate on natural gas extraction in Pennsylvania, Ohio and West Virginia.
Plans to levy a standard severance tax fail to consider the immense tax burden that Pennsylvania businesses already face. Our state has the unfortunate distinction as one of the worst in the nation when it comes to taxing employers. Our corporate income tax of 9.99 percent is the highest effective rate in America, and we are one of only two states to cap net operating loss deductions.
Contrary to assumptions made in the column, taxes do not exist in a vacuum. They operate as layers of costs borne by all taxpayers. To assert that a standard severance tax would eliminate competition among Marcellus Shale states is naive, at best.
A standard tax rate would put Pennsylvania at a competitive disadvantage since our impact fee — which brings in $200 million annually — is a more reasonable rate than the 5 percent severance tax levied in West Virginia. Furthermore, since West Virginia’s corporate tax rate is 6.5 percent — nearly four points lower than Pennsylvania’s — matching its severance tax would make our uncompetitive corporate tax rate that much worse.
Pennsylvania’s impact fee is working, and our state is leading the way in growing the natural gas industry. Putting this growth at risk by adding more taxes is bad economic policy, and it will only prove that Pennsylvania’s loss will be Ohio and West Virginia’s gain.
President and CEO
PA Chamber of Business and Industry