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Pennsylvania Proposals Aim to Lower Personal Taxes

The debate over taxing shale gas production in Pennsylvania is increasingly focusing on where the money would go, as two Philadelphia-area Republican lawmakers proposed severance taxes last week designed to ease the tax burden on individuals.

State Senate Majority Leader Dominic Pileggi announced plans last Wednesday to freeze school property taxes for senior citizens through a "reasonable and competitive tax" on natural gas from the Marcellus Shale and other shale formations in Pennsylvania. Although Pileggi has yet to present the specific details of his proposal, he said his severance tax would be a fixed rate on both the volume and price of natural gas, and would bring in around $250 million per year for the next five years at current prices. "The tax burden would be shifted from seniors, many of whom are struggling to stay in their homes on a fixed income, to companies involved in natural gas drilling in Pennsylvania," Pileggi wrote in a memo to his fellow senators.

Pileggi suggested that his severance tax did not mutually exclude an "impact fee" designed to help local communities offset development, such as the one proposed by state Senate President Pro Tempore Joe Scarnati (see Shale Daily, April 29).

"This proposal does not address the issue of the Marcellus Shale industry's impact on the environment and local communities," Pileggi wrote. "I support Sen. Scarnati's approach in that regard, implementing a fee to cover the cost of these impacts."

On the same day state Rep. Nick Miccarelli proposed a natural gas severance tax as a way to lower state personal income taxes. Although the actual language of the bill is not yet available, including whether it would tax natural gas by volume or price, Miccarelli said his legislation would impose a 3% tax that would jump to 5% after two years of production. He said his legislation would raise $1.1 billion by 2015 and lower the state personal income tax to 2.99% from its current rate of 3.07%.

Both proposals aim to keep Pennsylvania revenue neutral. Of the other severance tax proposals introduced this year, all would bring additional revenue to the state to offset shortfalls in education spending, to fund flagging environmental programs and to compensate local governments for bearing the impact of development (see Shale Daily, May 11; May 5; April 19; March 30).

That distinction is important because Gov. Tom Corbett said he will not sign any tax bill that brings money to the state General Fund, despite public support for a tax and a $4.2 billion shortfall in the budget (see Shale Daily, April 27).

It's also important because Grover Norquist, the president of Americans for Tax Reform, recently claimed that a severance tax would violate the terms of the Taxpayer Protection Pledge that Corbett and 34 members of the Pennsylvania General Assembly signed, a pledge promising not to increase any taxes while in office. That pledge, however, includes an "offset provision" allowing lawmakers to switch out one source of tax revenue for another (see Shale Daily, May 27).

On Tuesday state Senate Democrats stood on the steps of the Capitol rotunda in Harrisburg to call for a severance tax. Later, representatives of various environmental groups addressed a group of about 200 people, calling for a complete halt to all natural gas drilling activities until the state conducted a comprehensive study of its impacts, according to various press reports.

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