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Pennsylvania Accountants Support Wolf's Severance Tax Proposal

More than half of all Pennsylvania certified public accountants (CPA) surveyed in a recent poll said they support Democratic Gov.-elect Tom Wolf's plan to implement a 5% severance tax on oil and natural gas production in the state, identifying it as a leading option to close the state's nearly $2 billion budget deficit.

The poll, conducted by Pennsylvania-based Franklin & Marshall College in cooperation with the Pennsylvania Institute of Certified Public Accountants (PICPA) and the New Jersey Society of CPAs, surveyed 832 accountants, of which 418 work in Pennsylvania. It has a sampling error of plus or minus 3.6 percentage points.

According to the poll, when asked to identify their top three suggestions for closing the state's budget gap, 67% of respondents suggested imposing a severance tax on oil and gas production. While they agreed with Wolf's campaign promise to levy a 5% tax on producers, 69% also identified privatizing Pennsylvania's public liquor stores as the top choice in generating more revenue for the state. Wolf opposes that plan and has said he would like to extend hours and open more stores when he becomes governor.

In addition to the ongoing debate over a severance tax, privatizing the state's liquor stores and reforming its public pension system have been just as contentious. Republican Gov. Tom Corbett, whom Wolf defeated in the general election last month (see Shale Daily, Nov. 5), has fought for four years without success to privatize the state’s liquor sales.

Over the summer, during the last round of budget negotiations, pension reform, privatization and an oil and gas severance tax were hot-button issues during debate about ways to generate more revenue (see Shale Daily, June 17). All of those proposals failed when legislators passed this fiscal year's budget.

The state's Independent Fiscal Office has projected the 2015 deficit at $1.85 billion. Wolf says a 5% severance tax on production could generate up to $1 billion in annual revenue for the state, an estimate that's been challenged by the industry based on the fluctuating value of natural gas (see Shale Daily, Oct. 31).

When choosing their top three strategies for economic expansion, three-fourths of respondents to the survey selected reforming government pensions, while 59% said the corporate net income tax should be reduced and a severance tax should be levied on gas production.

Currently, the state has an impact fee, or a flat fee charged for all unconventional wells drilled in the state each year for distribution to local communities and state agencies (see Shale Daily, April 4; Feb. 15, 2012). Wolf pushed for a severance tax throughout his campaign, which other polls have shown to be popular among the general public.

Wolf will have to deal with a Republican-controlled legislature that also bolstered its numbers in November. Incoming state House of Representatives Speaker Mike Turzai has said he will not consider a severance tax until lawmakers give further consideration to proposals to privatize liquor stores in the state.

Since Wolf's election, pundits have viewed those proposals as a bargaining chip that could help get a severance tax passed if liquor stores are privatized in the process. Turzai has said that such sales could generate up to $1.5 billion.

PICPA's Fiscal Responsibility Task Force has been studying many of the issues asked about in the recent poll, including work that will appear in a 2015 report that it will present to Pennsylvania's new General Assembly in January. Wolf's proposed budget is expected sometime in March.

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