Natural gas drillers claim they have paid hundreds of millions of dollars in Pennsylvania taxes, but data from the state Department of Revenue tell a different story, according to a report released this week by the Pennsylvania Budget and Policy Center.
Of the 783 companies to file corporate net income tax returns in 2008, 85% paid nothing in taxes. Many other drillers, including nine of the top 10 permit holders in the Marcellus Shale, structure their businesses to attract investment capital from individuals who avoid the corporate net income tax altogether and pay the much lower personal income tax.
“Drillers profiting from the rich gas reserves of Pennsylvania’s Marcellus Shale are getting a free pass,” said Sharon Ward, Director of the Pennsylvania Budget and Policy Center. “Federal incentives significantly cut their tax bills at all levels. Most drilling corporations pay no corporate income taxes, and the majority of all big oil and gas companies in the Marcellus Shale are paying the same tax rate as the person serving coffee at the corner diner.”
The industry claims Marcellus Shale production has generated more than $1 billion in state and local tax revenue, but the Pennsylvania Department of Revenue data show the oil and gas industry paid only $38.8 million in state business taxes in 2008. That includes $17.8 million in corporate net income taxes, $13 million in personal income taxes and $8 million in capital stock and franchise taxes.
In 2009, oil and gas drillers in Louisiana, Texas and West Virginia paid considerably more in state and local taxes than they did in Pennsylvania. Drillers paid $44 million in Pennsylvania sales and business taxes, while in Texas, they paid $8.8 billion in drilling, property, sales and corporate taxes.
“Texas has about 34 times as much oil and gas drilling as Pennsylvania, but took in 200 times as much in taxes from the industry,” Ward said. “Clearly, drillers are getting big tax breaks in Pennsylvania that they don’t enjoy anywhere else.”