Budget pressures revive talk of gas extraction tax
HARRISBURG – Gov. Tom Corbett’s longstanding opposition to an extraction tax on natural gas in Pennsylvania is running up against the reality of weak state revenue collections and election-year spending pressures, but even the remote possibility of such a levy carries immense political implications.
The governor’s communications director said Wednesday that Corbett’s opposition to the tax had not softened, but the question led her to bring up the state’s fiscal problems heading into the June budget season.
The spokeswoman, Lynn Lawson, declined to say if Corbett still rules out an extraction tax that could raise hundreds of millions of dollars a year for the cash-strapped state government.
“There’s an issue at hand,” Lawson said. “Revenues are not where they were projected to be. This is where executive leadership comes into play.”
Corbett signed a bill two years ago that imposed an impact fee on natural gas drilling, with much of it going to local governments, but he repeatedly denounced an extraction tax on grounds it could hamper the growing industry and limit the jobs it is bringing.
“Active discussions are ongoing,” Lawson said. “As the governor has said several times, these discussions are part of the budget process.”
There is wide consensus that the state’s billion-dollar revenue gap, which follows several years of deep and unpopular spending cuts, has left few options. Still, it is far from clear that an extraction tax could pass the Legislature, where both chambers are controlled by Corbett’s fellow Republicans.
House Republican leadership wants to focus on spending cuts and would rather privatize the state’s system of liquor stores to raise new revenue, caucus spokesman Steve Miskin said.
“Right now (GOP leaders) don’t support it,” Miskin said Thursday. “We know it’s going to be a difficult year. Obviously, as we go through the budget line by line, we’re going to see what’s actually needed.”
The vast majority of House Democrats favor an extraction tax, but in exchange for their votes, they would insist on having meaningful input into crafting the bill and into the terms of the overall budget, caucus spokesman Bill Patton said.
“We don’t want to violate any confidences, but the Republicans, including some who have rejected a tax in the past, seem to be looking at things entirely differently, given the abysmal revenue collections this year,” he said.
An extraction tax would go against a pledge Corbett made four years ago when running for governor that he would oppose all new taxes or fees, although that promise was violated when he signed the impact fee as well as a multibillion-dollar deal late last year to finance transportation projects through higher gasoline taxes and motorist costs.
The issue ties together three questions that are at the center of this year’s campaign, as Corbett seeks a second term: how to regulate the growing Marcellus shale industry, what level and mix of taxes is appropriate for the state, and how much money will be coming out of Harrisburg for education, human services and other government programs.
Earlier this week, Corbett’s second-in-command spoke in stark terms about the downside to such a levy, according to the Pittsburgh Post-Gazette.
“When anyone looks at one particular industry and says, ‘Ah, we should tax them because they’re successful and they create jobs,’ the true meaning of what it is they’re saying is you should be penalized for being successful. And that’s wrong,” Lt. Gov. Jim Cawley told an energy industry conference in Pittsburgh.
Senate Republican spokesman Erik Arneson emphasized that even now, some seven weeks before the budget deadline, it’s premature to handicap its chances.
“It’s not a magic bean, but it’s something that has the potential to be part of a budget solution this year,” Arneson said. “It’s not dead, it’s not a sure thing — it’s somewhere in between. I’m not sure where that is, and I don’t know that anybody really is.”