Pennsylvania Gov. Tom Wolf continued the sales pitch tour of his Restore Pennsylvania initiative this week, saying the Keystone State has a chance to improve its infrastructure in a way no other state can.
Speaking before the Harrisburg Regional Chamber and Capital Region Economic Development Corp., Wolf said his proposed severance tax on natural gas would be lower than similar levies in other energy producing states. The $300 million he estimates the tax would generate, coupled with the $190 million impact fee would still be less than what Texas generates for its severance tax.
Pennsylvania is the only gas producing state that does not have a severance tax.
Wolf said the state could securitize that revenue source to produce $4.5 billion in bonding within four years. That funding would then be available for cities for such projects as improving flood protection, bolstering broadband access and addressing blighted neighborhoods.
He called this the exact opposite of an unfunded mandate for Pennsylvania communities.
“It’s basically saying what is it that you need in your area,” the governor said. “What is it that really affects your community… Well, here’s some money, let’s do something about that.”
The severance tax would then be used to pay off the bonds, and if the state generates more than $300 million in annual revenue, Wolf said the excess would be used to help reduce the state’s high corporate net income tax.
“When someone on the outside looks at Pennsylvania, what do you suppose they’re thinking when they see 10 percent?” Wolf said. “They’re thinking, ‘Well that state is obviously not open for business.'”
Continuing his sales pitch before business leaders, Wolf noted the excess severance tax proceeds could be used to lower the corporate tax without requiring mandatory combined reporting, which has been discussed before as a way to lower the tax. Business leaders, though, have balked at previous calls for combined reporting.
A Democrat in his second term, Wolf has long touted a severance tax for the state, but the issue has not gotten far with the Republican-led General Assembly. Opponents believe it will cost the state high-paying jobs, and even some Democrats have raised concerns citing that a severance tax might hinder efforts to develop renewable energy initiatives in the state.
While others loathe the prospect of creating a new tax, Wolf told the chamber crowd that they’re already paying severance taxes when they fill up at the gas pump or buy a product made of plastic. On top of that, the governor said the state’s Independent Fiscal Office estimates 80 percent of Pennsylvania’s severance tax would be paid by out-of-state consumers.
The statewide Pennsylvania Chamber of Business and Industry has been adamantly opposed to the Restore PA plan, saying it threatens the state's competitiveness and unfairly targets one sector.
“While the PA Chamber agrees infrastructure development should be a priority, punitive energy taxes are not the best means to achieve this goal," said Gene Barr, president and CEO of the chamber, in a statement this month. "One of Pennsylvania’s greatest advantages is our affordable and accessible energy supply. We are at risk of losing this competitive edge if state elected officials continue to call for higher energy taxes as a way to spend more government money."