- Marcellus Shale Series Introduction
- PA Budget Toads salivate over the Marcellus Shale goose
- Will EPA strangle the Marcellus Shale golden goose with red tape?
- Environmental justice and the EPA’s “new look” at regulating Marcellus Shale
- A Management and Process Look at PEC’s Marcellus Shale Report
- Forget Marcellus Shale; let’s turn Pennsylvania into a wildlife preserve
- Marcellus Shale; Pooling and Property Rights
- PA DEP acts swiftly to protect citizens from potential Marcellus Shale disaster
- Fees a Marcellus Shale cost of doing business; severance tax remains a bad idea
- Did PA DEP bash Marcellus Shale drillers for failing to report they had nothing to report?
- Should states compete to see which one can collect the most taxes?
- What in the name of liberty is a “competitive” tax?
- Cape Wind; too big to fail and too stupid to succeed
- Note to PA GOP state senators – Subject: Marcellus Shale Tax – There is nothing to negotiate.
As entertaining as it is to watch our exalted elected leaders salivate over the prospect of carving up the Marcellus Shale golden goose, it’s a farce we could probably do without. This year’s production of The Dance of the Pennsylvania State Budget Toads, starring our tax dollars and the usual cast of disconnected politicians, will leave us with yet another set of memories that “We the People” will be paying for in years to come.
I had intended to begin work on several pieces about process and how really broken government processes (Federal and state) are in general. Unfortunately after blood started shooting out of my eyes and then my head exploded as I read the article Tax on gas extraction poses new challenges, questions for state in the Patriot News this morning (7/6/10) I decided to fire off this post right now and link it to the more in depth analysis pieces when I get around to them.
In general the “challenge” itself stems from a classic act of cowardly governance, kicking the can down the road, as described in a related post. More specifically the “challenges” as described in the Patriot News article as related to the Marcellus Shale golden goose are listed as:
- What to tax
- Picking a rate
- How to distribute the revenue
- Granting exemptions
Since Fast Eddie Rendell and the PA Budget Toads are hell bent on creating a natural gas extraction tax I’m not going to bother with the reasons why the idea of such a tax is just plain dumb to begin with.
What to tax
The options they are considering are (1) flat rate tax on gas coming out of the well head, (2) a percentage tax on the amount of extracted gas when it is sold, and (3) a combination of the two.
From a collection and budgeting perspective the PA Budget Toads like option 1 because they believe it to be easier to project tax revenue for budgeting purposes. The drawback described is that in years when the price of gas sold is higher, state tax revenues would not be higher because the tax applied is a flat rate. In years when the price of gas sold is lower the flat rate in effect be a higher tax rate and would put a larger dent in gas producer profits.
With option 2 our poor PA Budget Toads would be faced with a less predictable tax revenue stream caused by the unpredictability and volatility of the energy futures market. The other drawback described is that there would be capital expense for meters to be placed at the point of sale versus the well head and a host of state workers would be needed to go around checking meters. Of course option 3, a combination of 1 and 2, combines the drawbacks into an even messier approach.
The other issues
Picking a rate is nothing more than the ongoing debate between (1) the free market, common sense answer that taxing gas extraction is the wrong answer in the first place so the rate should be zero and (2) the liberal/progressive position based on a essentially zero understanding of how jobs and economic growth are actually produced and never having met a free enterprise that they didn’t want to tax into mediocrity or bankruptcy. The how to distribute debate is over who gets to control and play budget games with a stream of tax revenue. Granting exemptions is more or less an extension of the “who gets to control/decide the allocations of the tax revenue” question.
How about a little heroic governance for a change?
I’ll revisit the subject of Marcellus Shale as it relates to founding principles, government in general, and American Energy Renaissance in future posts. For now here’s a thought to consider about government and budgeting for the Commonwealth of Pennsylvania in general. How about biting the budget bullet once and for all and aligning the annual budgeting process so that you are determining the budget for the coming year based on taxes actually collected in the previous year. The prior year’s tax collections, parked in a holding account, become the upper limit on what you can spend for the forthcoming budget year. No worries about projecting tax revenue for a budget. The budget will be what was collected, on hand, cash available to spend, from the prior year. One more thing to make this a really heroic governance approach; you don’t have to spend every last penny of tax revenue from a prior year just because it’s in your little government porky bank. Cushions in case of hard times and tax rebates aren’t such bad things.
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