While the November general elections are a long way off, we expect proposals for a shale gas tax to become a big part of the political debate.
In some ways, it already is. Democrats running for governor are all calling for an extraction tax as a way to boost spending on education and the environment. And even a few Republicans in the state Legislature have come out in support of such a tax, in part because of a potential hole in the upcoming state budget.
But another reason these Republicans are backing the proposal is that they represent areas in the extreme eastern part of the state outside the Marcellus Shale region. Property owners there are not benefiting directly from the shale, and we presume there is greater support for such a tax in those areas.
Gov. Tom Corbett, of course, has steadfastly opposed any extraction tax for shale gas. It’s part of his expressed rejection of any tax hike in the commonwealth — although the current impact fee on shale gas and the new fees imposed on gasoline sure look like taxes to most Pennsylvanians.
Corbett’s main argument against an extraction tax involves the notion that it would discourage gas production in Pennsylvania. Critics counter that such taxes in other states haven’t thwarted drillers.
Obviously, the rate of taxation is likely to be one of several factors when it comes to drilling decisions. Undoubtedly, the higher the taxes, the less benefit drillers would see from operations in the commonwealth. But at what rate does a tax actually turn away drillers?
And where is the dividing line between where the commonwealth has a legitimate reason to tax natural gas supplies for the greater good and where such a tax becomes a convenient means for government to grab more cash?