State Budget and Taxes

Houston, We Have a (Revenue) Problem

Pennsylvania General Fund revenue collections fell short of estimate, for practical purposes, by more than $100 million in what is usually the largest month of collections for the year. March receipts typically get a boost from a swell in corporate tax payments, but lower-than-expected bank tax collections this March brought corporate tax revenues in well below estimate. Sales tax collections also missed the mark for the fifth straight month.

Morning Must Read: PA Senator Proposing 5% Natural Gas Severance Tax

State Senator Vincent Hughes of Philadelphia will unveil a plan today to assess a 5% severance tax on natural gas drilling in Pennsylvania. He told the Philadelphia Daily News that his plan will generate more than $1 billion for education by 2020:

Apocalypse Not: Study Finds Severance Tax Unlikely to Scare Away Drillers from Marcellus Shale

By Parth Vaishnav (left) & Nathaniel Horner (right) of Carnegie Mellon University

Parth VaishnavNathaniel HornerA common argument against enacting a severance tax on shale gas in Pennsylvania is that the additional cost will cause the industry to leave the state. As graduate students in the Department of Engineering and Public Policy at Carnegie Mellon University, we decided to test that idea.

We found that replacing the state's current drilling impact fee with a 5% severance tax would be very unlikely to inhibit new drilling. Our study looks at what such a tax would mean on a driller's internal rate of return (IRR) and how that would influence drilling decisions. What we find is that while a severance tax would decrease a well's IRR, as does the impact fee, the decrease is rather small — making wells still quite profitable for drillers.

Some Major Corporations Pay Little or Nothing in State Income Taxes

What do Pennsylvania-based companies PPL, H.J. Heinz, Airgas, Allegheny Technologies, Hershey, and Comcast have in common? They each pay little or nothing in state income taxes, according to a new report from the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ).

Commentary: A Unified Tax Policy for Marcellus Drilling in Ohio, Pa., and W.Va.

On Tuesday, The Pittsburgh Post-Gazette published an op-ed that i co-wrote with Wendy Patton of Ohio Policy Matters and Ted Boettner of the West Virginia Center on Budget & Policy making the case for a unified approach to taxing shale drilling across our three states. Check it out:

Pennsylvania, Ohio, and West Virginia share a lot in common, including job markets, highways, rolling hills, watersheds and natural resources. In some places, shale wells in close proximity to each other are in different states.

Yet each of our three states has taken a vastly different approach to taxing oil and gas drilling.

Taking a Common Approach to Shale Taxation in OH, PA, WV

Although their state capitals are separated by hundreds of miles, Pennsylvania, Ohio, and West Virginia are home to Marcellus Shale gas fields that in some cases are separated by only a few miles.

From that vantage point, advocates from the three states said it would make sense for Pennsylvania, Ohio, and West Virginia to take a common approach to taxing shale gas and oil drilling.

Looking Beyond the Kinder, Gentler Budget

With state budget hearings in the rearview mirror, I wanted to offer a few thoughts about the Governor Tom Corbett's 2014-15 budget proposal.

First of all, this, the Governor's fourth budget, is very different from his first. Tough talk about reining in spending has been replaced with a host of new initiatives that resonate with the public, particularly women.

February Revenues Fall Short But March Will Be Bigger Month

Pennsylvania General Fund collections for nearly every major tax type fell short of estimate in February. Shortfalls in the collection of sales, personal income, and realty transfer taxes may be partly attributable to the excessive amount of inclement weather in February, but the bulk of the month's deficit is due to expectations of strong growth for 2014 falling short. This is the third consecutive month in which revenues have fallen short of targets.

Morning Must Reads: A Few Inconvenient Shale Truths

For a long time, we've been making two points about natural gas drilling in the Marcellus Shale. One, Pennsylvania's drilling impact fee brings in a fraction of what a severance tax comparable to those in other large energy-producing states would generate. And, two, the claims of job creation by the industry and its supporters (often used to cut off any talk of enacting a severance tax) are greatly overstated.

But don't take it from us. The Allentown Morning Call's Steve Esack has a pair of Sunday stories making the very same points.

Who's Right About Revenue Growth?

The Independent Fiscal Office (IFO) and Corbett administration are at odds over how much Pennsylvania will collect in taxes and other revenue for the remainder of 2013-14 and all of the 2014-15 fiscal year — to the tune of roughly $375 million. That's a little over 1% of what is expected to be spent in 2014-15.

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