Third and State This Week: Big Budget Rally, Mexican Trade Deficit & Marcellus Shale Taxes

This week, we weighed in on a debate over the tax payments of drillers in Pennsylvania. We also blogged about the state’s revenue surplus, a big rally at the State Capitol and the Pennsylvania jobs toll of a trade deficit with Mexico.

IN CASE YOU MISSED IT:

  • On the Marcellus Shale, Sharon Ward responds to a Pennsylvania Department of Revenue analysis of the tax contributions of the oil and gas industry. Michael Wood writes about comments made by Revenue Secretary Dan Meuser in The Pittsburgh Post-Gazette on the issue of whether gas drillers are structuring their businesses as pass-through entities to cut their state tax bills.
  • On state budget and taxes, Chris Lilienthal shares a short video from this week’s Rally for a Responsible Budget which brought more than 5,000 Pennsylvanians to the State Capitol. Michael Wood writes that better-than-expected revenue collections in April have pushed Pennsylvania’s General Fund revenue surplus to over $500 million.
  • Finally, on trade issues and jobs, Stephen Herzenberg blogs about the findings of a new Economic Policy Institute report on the U.S. trade deficit with Mexico. In Pennsylvania, that deficit has cost us more than 26,000 jobs since 1994.

More blog posts next week. Keep us bookmarked and join the conversation!

Revenue Analysis Goes Well Beyond Taxes Paid by Drillers

Sharon Ward, Director of the Pennsylvania Budget and Policy Center (PBPC), issued the following statement in response to a new analysis of the taxes paid by the natural gas industry from the Pennsylvania Department of Revenue:

The Department of Revenue’s new analysis makes an apples to oranges comparison of the taxes paid by companies engaged in natural gas drilling.

It alters the definition of drilling companies from what was reported in the Governor’s budget just two months ago. The definition was expanded to include companies that do not drill at all and would not be subject to a drilling tax, such as pipeline operators and suppliers of sand used in the fracking process. It also counts taxes paid by individuals and customers as taxes paid by the industry.

The Department’s analysis obscures as much as it illuminates. The largest tax contributions in each category come from a group of taxpayers identified as “other,” which is not defined. The analysis tells us how many filers pay taxes but not how many filers owed nothing in taxes, which is a departure from previous Revenue analyses. When pressed, the Department indicated that only 20% of corporate tax filers paid any corporate income tax in 2010, which is fairly consistent with 2008 Revenue data cited in a report we released last week.

It’s also important to remember that the natural gas industry is thriving in states with robust drilling taxes and we would expect that to be the case in Pennsylvania too. According to World Oil Online, gas companies drilled more wells in West Virginia, which imposes a drilling tax, than they did in Pennsylvania last year. Credible studies and comments by industry analysts indicate that a tax will not deter development of the Marcellus Shale.

We welcome responsible drilling to the commonwealth, but believe that any analysis of the impact of a drilling tax should start with an understanding of the actual taxes paid by the companies that would be directly impacted.

Third and State This Week: Zombies, Millionaire Taxes and Gas Drillers

This week, we blogged about New Jersey’s millionaire tax, taxes and Marcellus Shale drillers, zombies and much more.

IN CASE YOU MISSED IT:

  • On state budget and taxes, Steve Herzenberg explains that a millionaire tax didn’t chase the rich out of New Jersey. In light of that, Steve writes, Pennsylvania should consider enacting a higher tax rate on unearned income, which would mostly impact top earners in Pennsylvania. Kate Atkins, meanwhile, posts a short video of a Berks County rally for a better state budget.
  • On the Marcellus Shale, Sharon Ward invites each natural gas drilling company in Pennsylvania to release details on the state and local business taxes it pays. And Chris Lilienthal shares concerns about Senate President Pro Tempore Joe Scarnati’s proposed local impact fee on Marcellus Shale drillers.
  • Finally, Mark Price fights zombies who believe that only the rich pay taxes.

More blog posts next week. Keep us bookmarked and join the conversation!

Natural Gas Drillers Pay Little in Pa. State and Local Taxes

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.”

Read a press release about the report.

Read the full report.