Today the Pennsylvania House of Representatives will vote on SB 1155, legislation that would impose the state’s first ever severance tax on natural gas extracted from the Marcellus Shale.
An amendment offered by Rep. Kate Harper (R-Montgomery) was approved last night that will provide the necessary Republican votes to pass the severance tax on the House floor today. Harper’s amendment reduces the amount of severance tax revenue – expected to generate $110 million in the current fiscal year and more than $300 million in FY 2011-2012 budget – that goes to the general fund and allocates a greater share for various environmental funds.
As ATR has pointed out for more than a year and a half, a severance tax is not necessary and will adversely impact the Pennsylvania economy. Politically, it’s particularly ill-advised for Republicans, who hope to retake the PA House in just a few weeks, to join hands with Democrats in passing a tax hike on one of the few industries in the region that is actually creating jobs. As I pointed out in The Daily Caller this week, doing so will make it nearly impossible for them to run this fall against the higher taxes and unsustainable spending coming out of both DC and Harrisburg.
It’s unclear how Senate Republicans, who hold a 30-20 majority in that chamber, will receive the House version of the severance tax but many believe it is dead on arrival in the upper chamber due to the onerous rate set by the House, which at 39 cents per thousand cubic feet would be the highest severance tax in the country.
The House bill also has some legal issues that could torpedo the whole plan. From today’s Pennsylvania Independent:
State Rep. Scott Perry (R-York) said the bill was unconstitutional because the House chose to amend the severance tax language onto a bill which originated in the Senate. According to the Pennsylvania Constitution, all spending and tax bills must originate in the House of Representatives.
The bill may also violate the constitutional provision for single purpose bills, since the legislation originally contained in S.B. 1155 was not connected to a severance tax. House Republican spokesperson Steve Miskin said the bill, if passed, would almost certainly have to survive a lawsuit from gas companies before any tax revenue could be collected.
A number of House Democrats have even expressed concern about strategic wisdom of passing an energy tax hike just prior the midterm elections. Rep. Nick Kotik (D-Allegheny) in today’s Pittsburgh Tribune-Review:
It's asking (Democratic) members already in a vulnerable position because of (President) Obama and Rendell fatigue to vote for this…It can be construed by anyone running for election as a massive tax increase.
Yes, Kotik is right that today’s severance tax vote can be viewed as a “massive tax increase,” because that's exactly what it is.
ATR will continue efforts to defeat this job-killing tax increase when it heads to the Senate.