TO: ALL MEMBERS, PENNSYLVANIA GENERAL ASSEMBLY
FROM: DAVID N TAYLOR, PRESIDENT; CARL A. MARRARA, VICE PRESIDENT OF GOVERNMENT AFFAIRS
RE: PLEASE OPPOSE NATURAL GAS GROSS RECEIPTS TAX
The rumor of a gross receipts tax on natural gas is disconcerting and the mere presence of this rumor threatens Pennsylvania’s productive sector. This industry, an industry poised to revitalize our industrial economy, is being threatened with yet another tax. This new tax would be levied on top of the corporate taxes already being paid, the local taxes already being paid, and the only-state-in-the-country impact tax that is already being paid. Moreover, as recent press reports have affirmed, this is a tax on the end-user, the consumers of our commonwealth.
Often, more important than the tax rates themselves is tax certainty: the predictability and stability of taxes over time. In the case of the natural gas industry and those industries that are energy intensive, the constant and ongoing threat of attempts to find new ways of generating revenue from a specific sector of the economy is troubling.
Furthermore, the mere concept of a gross receipts tax is bad tax policy. As the Tax Foundation reported:
“…gross receipts taxes tax all transactions, including intermediate business-to-business purchases of supplies, raw materials and equipment. As a result, gross receipts taxes create an extra layer of taxation at each stage of production that sales and other taxes do not— something economists call ‘tax pyramiding.’ Gross receipts taxes have long been recognized as being non-neutral… gross receipts taxes tend to distort the composition of goods produced in the economy, as well as the structure of firms that provide them, making them an economically harmful revenue source.”
This tax was repealed in the FY 1999-2000 budget process by then Governor Tom Ridge. The five percent tax was automatically added to the monthly bills of natural gas customers whose suppliers were public utilities. At the time of the elimination the Governor said, "Let's eliminate the state tax on natural gas. It's a bad tax. The harsher the winter, the more people pay. Eliminating it will mean real savings for our families.” Reports at the time noted the savings to families, but also to manufacturers, small businesses, technology companies, and low-income working families. Let’s not undo measures that were taken to make Pennsylvania more economically competitive.
Pennsylvania does not have a taxation problem; Pennsylvania has a spending problem. Every day our debt grows, our programs frivolously expand, and our costs unnecessarily escalate. We ought not raise taxes and squander abounding opportunities when options in the area of spending restraint exist to balance the budget. Never has it been possible to tax our way to prosperity. We respectfully urge you to end the consideration of a gross receipts tax on natural gas, or any other industry specific duty.
For more on what is at stake, please refer to this recent op-ed (June 29, 2016) in the Beaver County Times entitled, “Cracker Plant Leads Manufacturing Comeback.”