We all remember positively the Spirit of ’76, when Americans declared Independence! But we also need to remember the Spirit of 1791, when Pennsylvanians fought against oppressive taxation in the Whiskey Rebellion. The farmers of Western Pennsylvania who had a thriving sideline business did not welcome additional taxation and were willing to put up a fuss about it. Ultimately no shots were fired and the excise tax was ended.
As we brace to fend off an attack of new energy taxes, we’re re-living a tradition that is alive and well of trying to protect productive Pennsylvania industry and jobs.
Pennsylvania’s current tax battle is bigger and more serious than the Whiskey Rebellion, but it has certain similarities. As was the case in 1791, the fighting issue today is taxation of a thriving domestic industry — oil and gas production. Fueled by rich natural gas deposits in the Marcellus shale, energy production has been a major source of economic growth and job creation in Pennsylvania for the past 10 years. We’re now the second largest natural gas producing state in the country, second only to Texas. And the nation is now the world’s number one producer of oil and gas. The historic role of natural resources in our state is now poised to return Pennsylvania to economic greatness. But not if it is stifled with burdensome new taxes.
Oil and gas producers already pay one of the highest effective corporate taxes rates, higher than most industries. And the commonwealth’s energy tax battle of 2015 is not limited to the state. We’re facing tax attacks at both the state and federal levels.
Our new governor is intent on imposing a state severance tax on all natural gas drilled in Pennsylvania. The most obvious outcome of that tax would be to make Pennsylvania natural gas uncompetitive with neighboring states like Ohio and West Virginia. It’s true these states have severance taxes, but the total taxes paid by Pennsylvania producers is already higher than the tax bite in competing states. To reach the billion dollars the governor wants the energy tax to produce, it would hit rates far beyond those of other producing states.
As the global glut in natural gas production drives down prices, it’s hard to imagine a more counterproductive proposal than Gov. Tom Wolf’s. However, President Barack Obama’s plan for a massive tax increase on domestic oil and gas producers nationwide gives Gov. Wolf’s proposal a run for his money. The size of these tax hikes would inevitably lead to a surge in consumer energy prices.
Additionally, the president’s plan disguises his energy tax hike as “tax reform.” By that he means stripping away legitimate tax deductions from oil and gas producers while leaving them in place for all other industries. That is the quintessential opposite of tax reform.
Right now we need to stage our own version of the early Pennsylvanians’ Whiskey Rebellion and enlist our state and congressional representatives in turning back these tax attacks on an industry that means economic strength and jobs.
Earl Baker is a former state senator and Chester County commissioner.