Google Plus Facebook LinkedIn Twitter Vimeo RSS
CPBJ Extra Blog

Severance tax vs. impact fee: So much to say

By ,

When you get pro-severance tax and anti-severance tax people together for a story on the natural-gas-drilling industry, there's usually a lot said.

Last week, the Pennsylvania Budget and Policy Center produced an analysis of natural-gas extraction companies and how much they actually pay in taxes, such as the corporate net income tax. It also looked at loopholes in tax law that allow the companies to reduce their tax liability.

Of course, this leads to the conclusion that Pennsylvania ought to enact a severance tax on gas drillers, getting money for the amount of gas pulled from the ground.

The Corbett administration fired back, accusing the center of liberal bias and stating that the gas drillers have paid more than $2 billion in corporate net income (at 9.99 percent, it’s the second highest in the country), sales, personal income and other taxes that came from gas drilling.

Of course, this leads to the conclusion that Pennsylvania has plenty of taxes on gas drillers, thankyouverymuch, and the impact fee structure imposed under Act 13 will be just fine.

Here’s a look at some of the extra but interesting stuff both sides had to say that I couldn’t fit into the original story.

Mike Wood, the PBPC’s research director, sent out an email after the center’s phone-in news conference. The email compiled numbers for how much more money would have been raised had Pennsylvania enacted a severance tax instead of an impact fee.

“In total, $472 million more would have been collected from calendar year 2011 (the first year of activity that was subject to the impact fee) through 2013 had a 5 (percent) severance tax been in place as opposed to the impact fee,” he wrote. “This figure does not include production from January 2014 to the present, so the ‘to date’ difference between the impact fee and a 5 (percent) tax would be larger.”

Please note: More than $630 million was collected through the impact fee.

Patrick Henderson, Corbett’s deputy chief of staff and energy executive, blasted the analysis and made a few claims about tax revenue of his own.

“The report lifts selective data to make its point that taxes on Pennsylvania job creators should be higher,” Henderson wrote. “Taken in context, though, corporate net income tax payments have grown by 32 percent since 2009, the onset of robust activity in PA.”

He added: “It is inaccurate to say that (corporate net income) tax revenue has ‘plummeted’ since 2011 — an unusual level of mergers and acquisitions across all business sectors — triggered the one-time spike in revenue in 2011. We do not recall the Budget and Policy Center issuing a press release in 2011 saying tax revenues went up by 400 (percent). ... Since 2009, sales tax revenue has increased by 80 (percent) and personal income withholding has also risen by 69 (percent). These are substantial indicators that robust job creation and retention leads to increased economic benefit for the Commonwealth.”

What do you think? Are the drillers taking advantage of Pennsylvania’s taxpayers, or are they paying too much?

More from the CPBJ Extra Blog

Write to the Editorial Department at

Leave a Comment


Please note: All comments will be reviewed and may take up to 24 hours to appear on the site.

Post Comment
View Comment Policy