Taxes

Pa. Marcellus Shale Fee Among the Lowest in the Nation

A blog post by Michael Wood, originally published at Third and State.

Lost amidst our work this week on Governor Corbett's 2012-13 budget was the state Legislature's passage of a Marcellus Shale package that will give Pennsylvania one of the lowest drilling tax or fee rates in the nation. The bill is now awaiting the Governor's signatures.

As The New York Times wrote this week:

Critics, among them some municipalities and environmental groups, said the bill was a capitulation to the energy industry and would all but eliminate their ability to decide where gas development could happen. The measure would limit it in densely populated urban areas but not in suburban spaces, critics said. They also said the environmental and safety standards, like the requirement that wells be at least 500 feet from any house, were weak.

The Times also cited our estimates that "at the current price of natural gas, the fee would amount to an effective tax rate of 2.6 percent, far less than the 5.4 percent in Texas."

The fee sets a 15-year rate schedule for Marcellus wells that rises and falls based on the price of natural gas and inflation. The Associated Press made the point, again citing our work, that this is much lower than drillers pay in other states:

Abandoning Pennsylvanians

Governor Tom Corbett unveiled a 2012-13 state budget Tuesday that abandons middle-class Pennsylvanians and our most vulnerable citizens.

The Pennsylvania Budget and Policy Center has a full analysis of the Governor's proposal. Here's the quick version.

With this budget, the Governor continues to turn his back on middle-class families who rely on good schools and affordable college tuition.

Help for the most vulnerable Pennsylvanians is reduced or eliminated. Tens of thousands of families and children have already seen health and other services terminated. This approach is not about finding efficiencies or cutting waste but rather cutting off help to people who have been hit hardest by the recession.

And while there is a call for greater accountability for every dollar in spending, businesses are let off the hook based on claims that they will create jobs in exchange for tax cuts that now total more than $1 billion.

This is not the path to a stronger economy or a better Pennsylvania.

We'll have more to say in the weeks ahead. For now, you can learn more by reading our analysis.

One Year and Still Going Strong

Third and State celebrated its one-year anniversary this week. We launched on February 1, 2011, and 350 posts later we're still going strong.

We couldn't do it without our readers, so we thought it would be fun to take a look back at what posts you liked the most. And so we bring you a countdown of the top 10 most viewed blog posts at Third and State.

10. Governor Corbett Unveils 2011-12 Budget Proposal, March 9, 2011:

By taking direct aim at schools and higher education, the Governor’s plan disregards a fundamental principle of economic growth — businesses locate and expand in states with an educated workforce and academic centers of innovation.

There is a better choice. Lawmakers can choose to take a more balanced approach that makes targeted cuts, improves accountability and raises revenue.

9. 2011-12 State Budget Highlights, June 28, 2011:

State legislative leaders and Governor Tom Corbett agreed on a 2011-12 state budget deal this week, and on Tuesday, the state Senate approved it on a 30-20 party-line vote. The bill heads to the House of Representatives next. ...

The biggest cuts, in both dollars and percentages, are in education programs, including PreK-12 and higher education.

8. Marcellus Shale, Unemployment and Industrial Diversity, August 3, 2011:

Pa. Loses $300 Million to Gas Drilling Tax Impasse

Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center.

Our Drilling Tax Ticker tracks the revenue Pennsylvania has lost since October 1, 2009 by not having a tax in place. It shot past $300 million Monday morning.

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

Plus, the $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years.

PA Tax Loophole Bill a First Step, More to Be Done

A blog post by Chris Lilienthal, originally published at Third and State.

Pennsylvania Representatives Dave Reed and Eugene DePasquale rolled out legislation today that would take an important first step towards closing corporate tax loopholes in Pennsylvania.

Corporate tax loopholes have been a problem for a long time in Pennsylvania. They don’t create jobs but do drain needed resources from good schools, health care and infrastructure.

Representatives Reed, a Republican, and DePasquale, a Democrat, deserve credit for recognizing this is a problem and taking steps to address it.

The bill, however, takes a limited approach and leaves many loopholes open for companies to exploit. It should be strengthened to ensure that big profitable corporations cannot use other artificial means to shift profits out of state and dodge taxes.

Matthew Gardner of Citizens for Tax Justice tells Philadelphia Inquirer columnist Joe DiStefano that combined reporting would be a better approach to closing loopholes. Under combined reporting, corporate net income tax would be assessed against income earned in Pennsylvania from a parent company and all of its related businesses.

As Gardner says:

Even if you’re successful in closing one [loophole], you’re doing nothing to stop the emergence of additional loopholes. Combined reporting ends the Whack-a-Mole game by taking away the incentive for companies to artificially shift income from one state to another.

SOTU 2012: Community Colleges, Workforce Development, Taxes & Infrastructure

A blog post by Mark Price, originally published at Third and State.

The Pittsburgh Post-Gazette has a pretty good summary of the State of the Union.

Here is the full text of the President's speech, and Wonkblog has a version of the speech with only what they define as specific policy proposals.

What follows are our favorites from the speech.

Community colleges and workforce development:

Join me in a national commitment to train two million Americans with skills that will lead directly to a job. My Administration has already lined up more companies that want to help. Model partnerships between businesses like Siemens and community colleges in places like Charlotte, Orlando, and Louisville are up and running. Now you need to give more community colleges the resources they need to become community career centers – places that teach people skills that local businesses are looking for right now, from data management to high-tech manufacturing.

I want to cut through the maze of confusing training programs, so that from now on, people like Jackie have one program, one website, and one place to go for all the information and help they need. It’s time to turn our unemployment system into a reemployment system that puts people to work.

Taxes:

Must Reads: State of The Union, Stimulus and Austerity Economics PA Style

A blog post by Mark Price, originally published at Third and State.

Tonight President Obama will deliver his State of the Union Address to Congress. We are expecting the President to recommend an extension through the end of 2012 of extended unemployment insurance benefits and the payroll tax credit. It looks as though a major theme in the address — besides the catch phrase “built to last” — will be conventional policies aimed at reducing inequality, such as increased spending/tax credits for education and training.

Education and training are important and fruitful means of reducing inequality, but they fall well short of what's needed to reduce the degree of inequality we now face.  A more forceful step in the direction of reducing inequality would include raising the minimum wage and making it easier for workers to form and join unions. We don't expect to hear the President call for either of those changes.

The President will propose paying for his new initiatives with higher taxes on wealthy households. As with education and training, restoring some sense of fairness to the tax code is a laudable goal but longer-lasting reductions in inequality will only come from policies that allow the pre-tax wages of more Americans to rise as the size and wealth of our economy grows.

Manufacturing, energy, job training and middle-class growth will be the cornerstones of President Barack Obama's speech tonight as he takes to the nation's grandest political stage for the annual address on the state of the union, according to senior advisers.

Pa. Revenue Mixed, as Governor Prepares 2012-13 Budget

Pennsylvania's revenue picture remains mixed as Governor Tom Corbett prepares to roll out his 2012-13 state budget proposal in a few weeks.

Pennsylvania continues to see an increase in collections over last year, but revenues trail Corbett administration estimates so far this year. That has prompted the administration to announce midyear budget freezes this month and could impact the budget plan the Governor will present in early February.

Weak corporate collections are taking a toll, and it appears likely that Pennsylvania will end the year with a revenue shortfall, despite solid growth from 2010-11. Still, the revenue picture, in the short term, may not be as dire as that painted by the Corbett administration. The state is carrying a half a billion dollars in reserve that more than covers the current shortfall.

The Pennsylvania Budget and Policy Center has a full analysis of the revenue numbers at the midpoint of the 2011-12 Fiscal Year.

Year-to-date tax collections as of December are up $398 million, or 3.6%, over this point last year, but are falling short of Corbett administration estimates by $466 million, or 3.9%. Total revenue collections are $487 million, or 4%, below estimates.

Year-over-year growth slowed in December with monthly tax collections outpacing those a year earlier by only $6.5 million, or 0.3%. Some of this slowdown has to do with a shift in the timing of sales tax payments, but weak corporate collections are also having an impact.

PA Job Growth in 2011 and More Layoffs, Higher Property Taxes in 2012

A blog post by Mark Price, originally published at Third and State.

On Thursday, the Pennsylvania Department of Labor and Industry released data on employment and unemployment in December. Compared to the summer months, the top line numbers were good, with unemployment falling three-tenths of one percent to 7.6% (U.S. rate is 8.5%).

Nonfarm jobs were up 6,500, which is a pretty good number (we need to average 8,000 new jobs a month to get back to full employment in three years). Service-sector job growth in December was atrocious; the sector added just 300 jobs. Most of the month’s job growth was in durable goods, with manufacturing adding 2,600 jobs, construction adding 3,000 and mining adding another 600.

Those 3,000 construction jobs don't represent a sudden resurgence of the construction industry. As most of you are happily aware, December was quite warm; this meant construction activity in the month was above historical averages which shows up as job growth in the final numbers. The actual trend in construction employment is at best no or very slow growth.

The bottom line is that in the last 12 months, Pennsylvania added 59,200 jobs. That's fewer jobs than were added from December 2009 to December 2010 (63,900). The primary reason Pennsylvania added fewer jobs in 2011 than it did in 2010 is the loss of 19,800 jobs in the public sector.

Ann Belser at the Pittsburgh Post-Gazette has more on the job numbers.

The "Dirty Thirty" Corporations that Spend More on Lobbying than Taxes

Taxes and democracy are two oft-maligned activities that Americans dearly depend on. "Indeed it has been said," noted Winston Churchill, "that democracy is the worst form of government except all those other forms that have been tried from time to time." He might just as easily have been talking about the responsibility of paying taxes.

Two years ago the Supreme Court's misguided Citizens United decision struck down long-standing Congressional limits on the political power of large corporations by vastly expanding the legal metaphor that "corporations are people." Now there is fresh evidence that corporate influence over Congress makes it easy for those same corporations to avoid their civic duty of paying taxes.

A new report identifies thirty Fortune 500 corporations that pay less in federal income taxes than they spend on federal lobbying.

You read that right. These companies - dubbed the "Dirty Thirty" - exploited loopholes in the tax code so aggressively that all but one of them enjoyed a negative tax rate over the three year period of the study, while together spending nearly half a billion dollars to lobby Congress on issues including tax policy. Instead of paying for the public structures such as roads, police and education which make their profits possible, they collected $10.6 billion in tax rebates from the federal government. Had these thirty companies paid the statutory 35 percent corporate tax rate, the Treasury would have collected an additional $67.9 billion.

Every dollar in taxes avoided by these Fortune 500 companies is a dollar that must be cut from public programs, added to the national debt, or paid in the form of higher taxes by ordinary taxpayers.

The companies in the Dirty Thirty include household names like General Electric, Verizon, Mattel, Wells Fargo, Dupont and FedEx. There's no avoiding how the story at each of these companies represents a mockery to both our tax system and our democracy.

January Freeze: Governor Announces $157 Million in Midyear Budget Cuts

Governor Tom Corbett announced $157 million in state spending cuts this week to resolve a midyear revenue shortfall. This marks the fifth straight year of cuts to health care, education and human services.

Weak economic growth in the first half of the fiscal year contributed to lower-than-expected revenue, but the picture, in the short term, may not be as dire as that painted by the Governor. The state is carrying a half a billion dollars in reserve that more than covers the current revenue gap. And despite falling short of estimate, state revenues as of December 2011 are still ahead of collections a year ago. Every major tax has seen year-over-year growth, except for corporate tax collections (which account for more than half of the current revenue shortfall).

Actions taken by the Corbett administration and the General Assembly have contributed to the revenue shortfall. The decision last year to allow corporations to accelerate depreciation costs may be costing more than originally estimated, while doing little to improve the economic outlook. That, combined with the continued phase-out of the capital stock tax in 2012, will cost the state hundreds of millions of dollars in lost revenue.

Changes to the revenue estimate may also be playing a role. Estimating a larger share of revenue collections in the first half of the year and a smaller share in the second half of the year, may have contributed to the midyear shortfall and could set the stage for a stronger revenue showing between now and June.

Déjà vu All Over Again: Mid-year Cuts and a Budget Shortfall on Tap for 2012

A blog post by Sharon Ward, originally published at Third and State.

Governor Tom Corbett will announce a new budgetary freeze before the end of the year to help resolve what the administration expects to be a $500 million revenue shortfall, according to Budget Secretary Charles Zogby, who gave the annual mid-year budget briefing on Tuesday.

Secretary Zogby painted a grim picture, as expected. The current revenue shortfall of $345 million could grow even beyond the $500 million current estimate, according to Zogby, and growth in mandatory spending for pensions, debt service and the Department of Public Welfare (DPW) will contribute to a budget for 2012-13 that is short about $750 million.

The Commonwealth plans to resolve the revenue gap with additional cuts. The secretary did not anticipate having "any revenue options" on the table and said he would look for further cuts in "waste, fraud and abuse" in DPW, controlling growth in corrections spending, and scaling back capital spending to make up the difference.

He did acknowledge that the Governor would rather reduce prisons than schools or higher ed and that making cuts was not something the administration relishes — suggesting that the work advocates have done this year may be penetrating.

In a nutshell, the persistently anemic economy is hurting tax collections, and growth in 2012 will be lower than previously estimated, making the 2012-13 budget more difficult than one would expect coming out of a recession.

Secretary Zogby rightly identified areas of built-in growth that will contribute to a structural budget deficit moving forward.

No PA Marcellus Shale Fee for 2011

A blog post by Michael Wood, originally published at Third and State.

Another year has nearly come and go, and still Pennsylvania has no Marcellus Shale drilling tax or fee.

To refresh your memory, the state House and Senate seem to be engaged in a game of how low can you go with their competing shale plans.

Last month, the House approved HB 1950, taking Governor Tom Corbett’s approach to a drilling impact fee. It would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate.

The Senate, meanwhile, adopted SB 1100, sponsored by Senator Joseph Scarnati, raising $360,000 over the life of an average well, the equivalent of 2.2%.

A comparable well in Texas would raise $878,500 — five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100. Even an industry-supported drilling tax proposal from August 2010 would collect more than these plans.

Under both the House and Senate bills, drillers will pay less in Pennsylvania than they do in Arkansas, Texas, Wyoming and many other energy-rich states.

Now fast forward to this week. On Wednesday, the Senate amended the Scarnati plan into HB 1950 and sent it back to the House before adjourning for the rest of 2011.

Why kick the ball back to the House? StateImpactPA explains:

A $56 million 'Oops': PA Revenue Department Updates Marcellus Shale Tax Estimates

A blog post by Michael Wood, originally published at Third and State.

Tim Puko at the Pittsburgh Tribune-Review uncovered a $56 million mistake in the Pennsylvania Department of Revenue's reporting of personal income tax (PIT) collections attributed to Marcellus Shale drilling for last year.

Back in May, the Department estimated that taxable Marcellus Shale royalties generated $102.7 million in PIT collections in 2010. Now the Department says that figure is a tad lower — $46.2 million, a decrease of $56.5 million or over 55% from what was reported six months ago. To quote Britney Spears, "Oops!"

How does this happen? By rushing too fast and using incomplete data to make a policy point, as I noted in the Tribune-Review story. This type of cheerleading report for a single industry is highly unusual for the Department of Revenue. There isn't a report of taxes paid by snack food manufacturers, steel producers, or even dairy farms.

The updated Marcellus tax data included another interesting tidbit — how little is paid in PIT from income flowing through to oil and gas company owners. In 2009, the Department reports $9.9 million in PIT from these taxpayers.

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