Patrick Gleason

New Penn State Study Shows Governor Rendell's Severance Tax to be an Economic Loser


Posted by Patrick Gleason on Wednesday, July 29th, 2009, 6:05 PM PERMALINK


While Pennsylvania lawmakers remain deadlocked in what has been the Keystone State's longest budget stalemate in nearly two decades, a new study on the Marcellus Shale Formation out of Penn State couldn't be more timely. Geosciences professor Terry Engelder's study helps explain why Gov. Ed Rendell's proposal to impose a severance tax on natural gas production would hurt the Pennsylvania economy, impede job creation, and actually have a negative effect on revenue.

Key findings from the study, outlined in the Pittsburgh Tribune-Review, are as follows:

"nearly 500 trillion cubic feet of natural gas could be produced from the entire formation, which is found in portions of five states, including most of Pennsylvania."

"Pennsylvania's Marcellus Shale natural gas formation alone could generate $13.5 billion in economic activity in the next 11 years."

Dr. Engelder's study concludes that plans by Rendell and legislative Democrats to impose a severance tax will yield a "30% drop in drilling activity and an estimated $880 million loss in taxes between now and 2020."

It is estimated that Marcellus Shale will create 98,000 gas industry jobs by next year. If one deduces that a 30% reduction in drilling activity will result in an equal reduction in jobs tied to drilling, Rendell's severance tax will result in upwards of 29,000 lost jobs.

This is in addition to the 24,000 jobs that the Beacon Hill Institute estimates would be lost due to Rendell's income tax hike alone.

Given the job destroying and economy depressing prowessness of Rendell's budget plan it's no wonder the Pennsylvania Governor's approval rating has sunk to record lows.

Lawmakers are set to take budget negotations to conference committee this week. Click here to view the July 14 letter that ATR sent to Pennsylvania lawmakers.

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Golden State Budget Band-Aid Complete


Posted by Patrick Gleason on Tuesday, July 28th, 2009, 2:04 PM PERMALINK


Moments from now Governor Arnold Schwarzenegger (CA-R) is scheduled to sign the latest budget agreement passed by the legislature late last week in a marathon session.

Before Schwarzenegger signs the $85 billion general fund budget he will need to use his line item veto to address the $1.1 billion hole created by the Assembly's failure to pass two provisions from the Big 5 agreement reached last week. Parts rejected by the Assembly include a plan for the state to keep $2 billion in gas tax funds earmarked for local goverments over the next two years. The other provision that failed to pass was heavily supported by ATR and would've have permitted drilling for oil off the coast of Santa Barbara. It would have been the state's first offshore drilling lease in 40 years.

In an official statement last week on the budget deal, Grover Norquist expressed ATR's position that while "there are a number of unpalatable provisions in this budget deal, as a whole it represents progress.... most importantly, does not raise California’s already high tax burden.”

In the wake of the budget deal Golden State lawmakers from both sides of the aisle expressed the need for tax reform in order to put an end to the state's perennial budget battles and reduce revenue volatility.

Final recommendations from a 14 member blue ribbon tax commission tasked with reforming California's tax code are expected to be released soon.

The legislature comes back into session on August 17.

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North Carolina Budget Negotiations Stall


Posted by Patrick Gleason on Tuesday, July 28th, 2009, 1:27 PM PERMALINK


It has been 28 days since the deadline to pass a budget and North Carolina lawmakers remain unable to reach an agreement. In light of an aproximate $4 billion deficit, the Democrat controlled House, Senate, and Governor's mansion have been at odds over which taxes to raise.

The conference committee was nearing a budget agreement last week that would raise income, tobacco, and alcohol taxes. However Gov. Perdue effectively blew up negotiations when she announced her opposition to an income tax.

Gov. Perdue's budget proposal includes alcohol and tobacco tax increases but she favors a temporary hike in the sales tax over an income tax increase. Perdue cited her concern for the middle class and working families as the reason for her opposition to an across the board income tax increase. What Perdue fails to explain is how she reconciles this concern with her sales tax proposal.

According to a recent poll by the Civitas Institute, not only do most North Carolina voters oppose a temporary sales tax, they don't trust Perdue's assertion that the sales tax would be temporary. 66% of those polled oppose Perdue's 1 point, 14% sales tax hike and 77% of those polled believe the sales tax increase would become permanent.

The latest reports from those on the ground in Raleigh allege that a continuing resolution will likely be passed today and all lawmakers except for conference committee members will be sent home. Stay tuned for further developments.

To view the letter that ATR recently sent to all North Carolina legislators, Click Here.

 

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California Legislature to Vote on Budget Tonight


Posted by Patrick Gleason on Thursday, July 23rd, 2009, 8:32 AM PERMALINK


A Thursday night floor vote is set in both chambers of the California legislature for a budget deal recently reached by Gov. Schwarzenegger and legislative leadership. Facing a $26.3 billion deficit, the plan calls for tough yet necessary spending cuts, relies heavily on accounting maneuvers and borrowing, but does not raise taxes.
 
Extension of the income, sales, and car tax increases passed in February was resoundingly rejected by voters in a May special election. Despite this Democrats have persisted in subsequent months with calls for higher taxes on everything from tobacco to energy to online purchases. 3 Republican votes are needed in each chamber to overcome the 2/3rds supermajority requirement to raise taxes in California. All Republican legislators and the Governor have pledged opposition to further tax increases. Americans for Tax Reform commends lawmakers for reaching a deal that, while far from ideal and full of many “kick the can down the road” provisions, does not raise taxes in the middle of a recession.
 
The budget agreement also permits oil drilling off the Santa Barbara coast. If approved, it will be the first offshore drilling lease in California in 40 years. It is reported that there are at least 9 billion barrels of oil off California's entire coast and at least 1 billion barrels are located in waters that are solely controlled by the state. Procurement of resources found in state controlled waters alone could generate $5 billion for the state right away via securitization. Policy analysts point out that these reserves can be tapped in an environmentally sensitive way with slant drilling, which requires no new rigs.
 
ATR vehemently supports offshore drilling as a way to close the Golden State’s budget deficit without further hiking taxes. ATR testified to this extent at an April Minerals Management Service hearing in San Francisco. The bottom line is that this budget is not perfect. Far from it. It is, however, the best budget deal that has been struck by the Big 5 all year.

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Arizona Special Session Continues - Gov. Brewer Continues to Insist Upon a Tax Hike


Posted by Patrick Gleason on Tuesday, July 14th, 2009, 5:20 PM PERMALINK


14 days into the new fiscal year, Arizona lawmakers remain in special session to resolve the state budget. The legislature has already approved two budgets, so what’s the hold up one might ask?  The reason is simply that an unelected governor refuses to sign a budget that does not refer her demanded 18% sales tax hike to the ballot.

Never mind the fact that an increase in sales tax will only further depress retail sales and ultimately state revenues, Governor Brewer is so desperate to get a tax increase in the middle of a recession that she is going to hold the state budget hostage until she gets it.

Two weeks ago Brewer vetoed a budget that included much needed spending cuts and permanent repeal of the state property tax. If you have a hard time understanding how Brewer's supporters still claim that she is a fiscal conservative in light of this, we share your bewilderment.

The Scottsdale Review reported yesterday that a number of GOP lawmakers are warming up to the idea of a sales tax referral in order to get the budget passed.

The article attributed Sen. Barbara Leff (R-Paradise Valley) as claiming that “it’s time for Republicans to vote to refer the issue to voters.” What Leff is actually arguing for represents a violation of the Taxpayer Protection Pledge, which she herself signed and in doing so made a promise to her constituents to “oppose any and all efforts to increase taxes. ATR encourages Leff’s constituents to write her to ask that she reconsider this position and uphold her commitment to Arizona taxpayers.

Explaining why he would not vote for referral of the Brewer tax hike under any circumstances, Sen. Ron Gould (R-Lake Havasu) states that he has “no faith that the governor’s a woman of her word.” ATR agrees with Gould that referring Brewer’s sales tax hike to the ballot at the end of this day is not compromise, it’s capitulation.

There is no example in recent history of a Republican governor pushing so adamantly for a tax increase, even in a good economy. What makes Arizona’s case all the more peculiar is the fact that she is fighting a GOP controlled legislature.

ATR urges Arizona taxpayers to CLICK HERE and urge their representatives oppose and vote "NO" on any attempt to refer Gov. Brewer’s 18% sales tax increase.

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California Tax Commission Nears Final Plan


Posted by Patrick Gleason on Tuesday, July 14th, 2009, 7:53 AM PERMALINK


The 14 member blue ribbon tax commission tasked with reforming California's tax code is set to release its final recommendations at the end of the month. In recent weeks it appeared that the commission was leaning toward a plan that would call for a flat personal income tax and a reduction in, or even elimination of, the state's corporate and highest in the nation sales tax. 

California's budget is heavily reliant on income taxes. And it is no secret that this fact combined with the progressivity of the state's income tax has resulted in an extremely volatile revenue stream for the state. Faced with a $26.3 billion deficit, even some Democrat legislators who would normally be loathe to the idea of a flat income tax have expressed an open mind. Assembly Speaker Karen Bass has even promised an up or down vote on the commission's recommendations, however unappealing they may be to her Democrat colleagues and the public employees unions that control them.
 
However just when it seemed that there might be a chance for pro-growth tax reform that would fix the unmitigated disaster that is the California budget, things appear to be taking a turn for the worst. This past weekend the commission’s liberal faction, which was appointed by legislative leadership, put forth a plan that will actually make matters worse. The key provisions, all of which entail little more than raising taxes or making it easier to raise taxes, were reported in yesterday's Sacramento Bee
• Create a "split roll" so that property taxes on commercial property are based on current values, removing it from Proposition 13's limits, a longtime goal of liberal tax reformers.
• Allow cities and counties to raise local sales taxes by up to 1 1/2 cents per $1 of sales with simple majority voter approval rather than the two-thirds now required.
• Impose a new tax on carbon-based fuels such as gasoline to reduce their use.
• The progressive state income tax structure remains untouched.
Those pushing such recomendations are not the only ones who didn't get the memo about the need to move away from volatile revenue sources. Anti-smoking groups are commencing a campaign to push for a $1.50/pack tobacco tax hike - a 172% increase. A tip for lawmakers: you might not want to take advice from a group that claims you should fund spending programs by raising taxes on an activity which that group openly seeks to eradicate. For more reasons why a tobacco tax increase will not help California, Click Here.

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Arizona Senate President Bob Burns Ousts Taxpayer Champions From Key Positions


Posted by Patrick Gleason on Thursday, July 9th, 2009, 10:16 AM PERMALINK


Last night Arizona Senate President Bob Burns, in what is viewed by many as a legislative temper tantrum,  booted two colleagues in leadership from key posts. Senator Thayer Verschoor (R-Gilbert) was ousted from his position as Senate President Pro Tem and Senate Majority Whip Pamela Gorman (R-Anthem) was removed from the Rules Committee.
 
Their crime: Defending taxpayers from a massive tax increase pushed by an unelected governor in the middle of a recession.
 
It has been a sad state of affairs for Republicans in Arizona this year. There was hope among many that years of fiscal irresponsibility would end with Governor Janet Napolitano being replaced by Republican Jan Brewer. Yet in a move that left many puzzled, Brewer came out of the gate early this year with a proposal for the aforementioned multi-billion dollar sales tax increase. Now true conservatives such as Gorman and Verschoor are being punished for not supporting the Governor's tax hike.
 
Verschoor will be replaced by Senator Steve Pierce (R-Prescott). Gorman's replacement on the rules committee has yet to be named.
 
Americans for Tax Reform condemns Burns' actions. ATR urges Arizona taxpayers to contact their representative in the legislature and urge them to join Verschoor and Gorman in standing up against the chocolate soldiers who are pushing to the Brewer-Coughlin tax hike. CLICK HERE to take action!

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Arizona Legislative Leaders Reportedly Reach Budget Agreement With the Governor


Posted by Patrick Gleason on Friday, June 26th, 2009, 3:58 PM PERMALINK


Arizona Senate President Bob Burns' spokesman recently confirmed that a budget deal has been reached between legislative leadership and Governor Brewer. Details of the agreement have yet to be confirmed but anonymous sources privy to the negotiations report that it includes referral of Gov. Brewer's sales tax increase to the November ballot. It remain unclear whether such a deal could garner enough votes to pass.

As ATR has made clear to Arizona legislators, referral to the ballot of the Brewer-Coughlin $3 billion sales tax increase would not be an acceptable outcome for Grand Canyon State taxpayers.

Furthermore, as ATR made clear in a recent letter to lawmakers, a vote to refer the sales tax increase to the ballot would be a violation of the Taxpayer Protection Pledge that 29 Arizona legislators have signed. By signing the Pledge, these 29 lawmakers have made a promise to their constituents to oppose "any and all efforts to raise taxes." A vote for the Brewer-Coughlin tax hike, even if subject to a public vote, represents a clear failure to oppose an effort to raise taxes.

Click Here now to contact your Arizona legislator and urge them to stand up for taxpayers by opposing any deal that would refer the Brewer-Coughlin $3 billion sales tax hike to the ballot.

The Goldwater Institute recently put together a great video that explains the budget debate in terms that even political outsiders can understand. That video can be viewed below: 

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Arizona Budget Update


Posted by Patrick Gleason on Wednesday, June 24th, 2009, 2:44 PM PERMALINK


With less than a week left before the state budget is due, Arizona Gov. Jan Brewer remains insistent upon her desired $3 billion, 17.8% sales tax increase. Brewer's stubborness continues despite the fact that the majority in the legislature has not only made clear that they will not increase taxes during the current recession, they have already passed a budget that does not include tax increases.

In the video below, Speaker Kirk Adams explains why just increasing taxes is not responsible governance and that adjusting spending so that the state lives within it's means is the only path to recovery. To sum up Adams' argument - it's the spending, stupid. Adams explains that total goverment spending in Arizona has grown by more than 53% in just the last 5 years. In fact, in 2006 alone state spending increase by a wreckless 20%.  Adams' message can be viewed below in it's in entirety.

Clearly there is much fat to be cut from the state budget and tax increases are not necessary, despite the claims coming out of the Governor's communication department and the mainstream media. Not only can the state rectify it's overspending problem without raising taxes, as Bryon Schlomach of the Goldwater Institute pointed out today, hiking taxes will only exacerbate the state's economic doldrums. Schlomach points out the following:

....the Federal Reserve Bank of San Francisco recently published an article summarizing research on economic multipliers. It turns out that a dollar of government spending results in 70 cents of job-creating activity after two years. A dollar in tax cuts results in $1.30 to $3 of job-creating activity after two years. Put another way, a $1 cut in spending cuts job-creating activity by 70 cents. A $1 increase in taxes cuts job-creating activity by as much as $3.

CLICK HERE NOW to contact your Arizona legislator and encourage them to stand firm in opposition to the Brewer-Coughlin tax hike.

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Golden State Fact of the Day: Severance Tax on Oil Will Further Depress the California Economy


Posted by Patrick Gleason on Wednesday, June 24th, 2009, 10:45 AM PERMALINK


 A severance tax on every barrel of oil produced in California was floated earlier this year and has returned as a topic of debate in Sacramento once again as the state seeks to rectify a $24 billion plus deficit.  In fact, a severance tax is among the cadre of tax hikes that the California Senate and Assembly will vote on today. While today's vote is merely a drill since it will not garner the 2/3rds majority required to pass a tax increase in California, it does present a good opportunity to discuss why a severance tax is bad policy and the myriad of reasons why Golden State lawmakers should reject any severance tax proposal:

·    A severance tax will cause Golden State residents to face higher utility bills and gas prices and, even worse, a higher cost of living in general. Make no mistake, the burden of a severance tax hike would be borne by all California residents and reduce jobs. An additional tax on in-state oil production would adversely affect workers and retirees, most of whom have a stake in energy companies through a 401K, mutual fund, or other investment vehicle.
 
·    California’s fiscal challenges are due, in large part, to reliance on volatile and unpredictable revenue sources such as high income earners. A severance tax will only exacerbate this problem. It is no secret that the price of oil is incredibly volatile; varying up to 30% a year. Imposition of a severance tax will only increase state revenue instability.   
 
·    Oil production is already taxed more heavily in California than nearly anywhere else. Energy companies operating in California already pay some of the highest corporate, property, and sales tax rates in the nation. Tacking on a draconian severance tax will only make the state a less attractive place for energy companies to locate, invest, and create jobs.
 
·    Imposing an additional state tax on oil production will serve as a disincentive on in-state oil production and increase the Golden State’s reliance on foreign imports. Studies show that imposition of a 9.9% severance tax will decrease in-state oil production by an upwards of over 2.4 million barrels over the next 30 years. It should come as no surprise that this decreased output would be accompanied by the loss of approximately 10,000 high paying jobs.
 
·    Rather than place a disincentive on in-state energy production. California lawmakers should instead utilize the state’s untapped petroleum reserves. Such action would simultaneously help address the current deficit without socking it to taxpayers yet again and create high paying jobs in the process.
 
·    There are at least 9 billion barrels of oil off California's coast. At least 1 billion barrels are located in waters that are solely controlled by the state. The natural resources found in state controlled waters alone could immediately generate $5 billion for the state through securitization. What’s more, these reserves can be tapped in an environmentally sensitive way with slant drilling, which requires no new rigs.
 
·    Californians worked 204 days last year, well over half the year, just paying for the cost of their government. If new and higher taxes were the answer then California would be in great fiscal shape, but that is not the case.
 
ATR urges California officials to reject the severance tax and chart a different course of action. California lawmakers need to promote, not put a disincentive on, utilization of the state’s abundant resources. Such an approach will generate much needed revenue for the state and create jobs in the process.

 

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