Fracking Tax Revenue Must Support the General Fund

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The Greater Lehigh Valley Chamber of Commerce’s position on the Marcellus Shale is a useful reminder of why it’s so important for the Democrats to kill Scarnati’s “impact fee” on a party-line vote:

The Chamber supports an impact fee for the extraction of Marcellus Shale. However, the funding generated from that fee should be used only matters directly or indirectly related to the gas extracted.

  • Any fee should be imposed, managed and collected on a state-wide level.
  • Any fee should not be added to the state’s General Fund.

The idea that the revenue should only be used to address harms from fracking is probably going to be one of the central Republican demands in this fight. This should be a non-starter for Democrats.

Not only should the revenue go to the General Fund, the goal should be to fund as much of the state’s expenses as possible with fracking tax revenue.

I know some activists want to ban fracking altogether, or fight it through zoning, but I don’t think those strategies are politically sustainable over the long run.

If you really want to stop fracking, I think the best thing to do is tax it at an extortionate rate. You want to find a sweet spot between maximizing revenue collections and substantially disincentivizing fracking.

Remember, gas companies are saying that even if PA’s severance tax is 1% higher than other states, they’re still not going to leave.

So what if the tax is 4-6% higher? 10-15% higher? How high does the rate have to go before you’re on the wrong side of the Laffer curve and drillers start leaving the state? We should find out.

Once the money’s going to the General Fund, you can use whatever’s left over after balancing the budget to lower other more regressive taxes like the sales tax. Taxing natural resource extraction is a much more progressive way to raise money than taxing sales, so you’d be making the tax code more progressive and more pro-growth at the same time.

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One Response to Fracking Tax Revenue Must Support the General Fund

  1. I live in the rural Southeastern Greene school district, which always gets the shaft when budgets are cut. Kids are the future, and frack tax revenue should go to offset the GOP's education tax cuts. Do we really want the Commonwealth in the hands of stupid people, like it is now? Run by morally bereft Dittoheads? Fund education now!