Lawmaker weighs in on severance tax debate

The idea of Pennsylvania imposing a severance tax on the removal of nonrenewable resources like natural gas has been hotly debated as of late, with those on both sides of the issue weighing in.

State Rep. Rick Mirabito, D-Williamsport, has his own views on the topic.

The suggestion that jobs will be lost and companies will leave if a severance tax is imposed, is “a specious argument,” he said.

“The idea that we would be scaring away companies from drilling here, or cheating the people of this state, is totally misleading,” he said.

First of all, he said, companies know what rate the severance tax is, if the state has one, and they build that into their business model, so the tax “isn’t eating away at their profits.”

In addition, companies won’t simply pull up an entire drilling rig and leave Pennsylvania, Mirabito said.

“Not only would it cost millions to move their rigs, but where would they go?” he said. “New York has strict regulations about where you can drill, if at all. Ohio is looking at raising their severance tax by 2.5 percent and West Virginia’s is about 7 percent. A total of 38 states have severance taxes. Where are they going to take these jobs to?”

He added that a common argument against a severance tax is that Pennsylvania has a high corporate income tax of 9 percent – but many of the large drilling companies create smaller entities to operate in states as limited liability corporations, which means that they pay only 3 percent in income tax.

Gas-drilling companies also are considered part of the manufacturing industry, meaning that they don’t pay sales tax on their equipment or property taxes on the land they use, Mirabito said.

“Compare that to a small business owner,” he said. “They pay 6 percent sales for the material required to build their business, on top of property taxes. It’s irresponsible that we don’t ask the same of the gas companies.”

As for the impact fee already imposed by the state, Mirabito said many people aren’t aware that only some of it comes back to the county.

“Only 53 percent of the impact fees collected from Lycoming County actually get back to us,” he said. “The other 47 percent goes to other areas.”

Instead, he said, 100 percent of the impact fees should stay local, freeing up severance tax money to be used at the state level for projects like infrastructure, transportation, and education spending.

He believes that the state is missing out on a huge opportunity for revenue by not imposing such a tax.

“We could have imposed this in 2009 or 2010 and been collecting revenue from it ever since,” he said. “In the last four years, we’ve probably lost more than $1 billion that could be helping education, our senior population, you name it.”

“It’s not being punitive,” he said. “It’s establishing a policy that makes sense, that is fair and equitable.”

As to possible solutions, Mirabito had several ideas, including a severance tax at 3 percent and keeping 100 percent of impact fees staying local, “which would still be the same or lower than many of the other states.”

Mirabito said that the job of lawmakers is not to appeal only to a certain group when it comes to a severance tax discussion.

“Our job is to look at what’s best for all people, not only those with certain interests,” he said. “We’re shortchanging the people of rural Pennsylvania by not considering this option.”