Marcellus Shale: Income Or Extraction Tax

By Brittany Foster, Contributing Writer

The Pittsburgh Tribune Review published an article yesterday which offered a new explanation on why the Marcellus shale industry should not be subject to an extraction tax: citizens who have wells are paying more in income taxes.

When a driller puts a sink well in the backyard of a local citizen, the land owner has to report the amount they received in rent as earned income and thus, ends up paying more in income taxes.

The Trib quoted one resident saying, “I wrote the checks to pay the taxes, so I know. This thing is generating tax revenue. And rightly so. We make money, so we pay taxes. That’s how things work.”

The prevailing idea here is that the revenue generated by local farmers paying more on their income taxes exceeds that which would be paid by the industry in an extraction tax. Although it is difficult to determine this for sure since the state has yet to try an extraction tax.

This is not an argument the industry has been making widely but expect to hear it more as the Marcellus debate makes its ways into the halls of the General Assembly.

7 Responses

  1. The concept of personal property rights is under assault. The notion that minerals or gas located on or below personal property are somehow “community property” is just that — a communistic idea. The corporations extracting gas pay corporate income taxes to the state just like every other PA corporation. That they should pay an additional tax specific to their industry is absurd. If PA seeks revenue from this gas, let them sell leases on public land.

  2. Income generated from gas leases is only taxable for the state-level Personal Income Tax (PIT), not the municipal and school district Earned Income Tax (EIT). So, that money goes to the General Fund, nowhere else.

    The author should be careful about using the phrase “rent as earned income,” you should change it to “rent as personal income”

  3. Actually this argument over income taxes is not new. . . we’ve been talking about tax revenue from individuals for years. Pennsylvania already taxes gas extraction in several ways that other states do not.

    Drilling states like Texas, Wyoming, and Arkansas do not have a personal income tax. Texas and Wyoming don’t even had a corporate profits tax and these states all have lower tax burdens than Pennsylvania.

    Jan Jarett and PennFuture are only in favor of a tax or fee if it funds Growing Greener because they give grants to PennFuture. At least other lobbyist admit they want more money for themselves and not pretend it is for “the environment”.

  4. Oh, horse pucky! The tax, if sensibly applied, won’t bankrupt anyone. We should have severance-taxed the coal industry 100-150 years ago, and we wouldn’t today be fighting the legacy of acid drainage. We should have severance-taxed the oil-gas industry then, too, and we would have the money to plug the tens of thousands of abandoned wells, some of which are being refilled with pollutants as fracking occurs. You greedy oligarchs with your “MY” mineral rights make me laugh! What the hell did you do to earn those rights? Did you plant gas? Cultivate it? Plow it? No, you just had dumb luck to buy land that had gas hidden beneath it, and you didn’t even know it. We’re just saying that you aren’t gonna foul up our air, water and roads while you get rich. We want a piece, and we’re damn well gonna take it, so shut up, figure out a sensible tax, and let’s get on with life.

  5. So Mrs. Jarrett, MY mineral rights actually belong to you? But your beloved – and heavily subsidized – windmills deplete OUR wind. Shouldn’t they too be subjected to a severance tax? At the very least they should pay for themselves. Pennsylvania already has among the highest total corporate burdens in the world. I’m sure those drillers would gladly swap a few so your pet projects can be funded by my, er excuse me, our mineral rights.

  6. No one is arguing that drilling is not generating taxes just as any economic activity is. The argument is over whether or not to levy a severance tax in order to compensate the citizens of the Commonwealth for the depletion of a non-renewable natural resource, much of which will be used in other states.

    Only a severance tax can directly provide compensation to Pennsylvania taxpayers for damage to natural resource, local communities, general increases in demands on our roads, bridges and local and state government services. The impacts of drilling are statewide. Air and water pollution do not stop as municipal boundaries; drilling requires state government oversight; trucks and equipment roll over our interstates.

    All other major gas producing states, all of which also levy other income, property and business taxes, levy some sort of severance tax. The gas drillers must pay their fair share here as they do everywhere else. Pennsylvania taxpayers deserve no less.

  7. just OY! what a stupid argument-an extraction tax compensates ALL the state’s citizens for the depletion of THEIR resource.

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