Revenue Secretary: Spending Is The State's Problem, Not Revenue

Acting Revenue Secretary Daniel Meuser led off House Appropriations Committee budget hearings today saying revenue was not the issue because the state is collecting some of the highest levels of revenue it has ever collected. The problem, he said, is the level of state spending are not sustainable.

Meuser said they project a $78 million surplus for the FY 2010-11 fiscal year, which includes a $110 million over-estimation of the Gross Receipts Tax, $69 million cost to the bonus depreciation change and other adjustments. Other revenues seem to be flowing in per estimates, he said.

Marcellus Shale Taxation: Rep. Greg Vitali (D-Delaware) expressed concerns about the Governor not proposing a Marcellus Shale severance tax when his budget is proposing deep cuts in education and welfare programs. A severance tax could bring in $200 million for FY 2011-12 by some estimates, he said.

Meuser said Marcellus Shale related companies have paid more than $100 million in state taxes and since West Virginia passed a severance tax only 20 Marcellus Shale wells have been drilled there while Pennsylvania has had 600 wells drilled.
He also said his agency has not done an estimate on what a severance tax would bring in or of potential job losses if a severance tax is adopted. Meuser said a severance tax is a relatively new tax, 60 or 70 years. He explained his responsibility is not to defend any industry, but collect taxes due.
Meuser noted, as with most companies (70 percent), Marcellus Shale drilling companies do not pay corporate income tax, because they are typically S corporations or limited partnership, but do pay other taxes as they are required to do under current state law. He said gas production royalty payments have not yet really begun, but will result in additional Personal Income Tax revenues.

Meuser encouraged legislators to ask county commissioners where there is drililng whether they think drilling companies are paying their fair share of taxes.

Rep. Vitali noted under Pennsylvania law, natural gas property interests are not taxable under county or local property tax.

Under separate questioning, Rep. Brian Ellis (R-Butler) noted the state has benefited from leasing state lands which adds upfront and royalty payments to the Commonwealth directly.

Further questioning was discontinued by Chairman Adolph saying those questions would be better directed to the Governor's Budget Secretary.
Click Here for PA Capitol Digest coverage of this hearing.