As Pennsylvania confronts its own energy tax issues, it’s important not to lose focus on potential threats from our federal representatives. The headlines are full of debate in the Pennsylvania Legislature on energy taxation — whether we should follow the Governor’s lead to impose a severance tax on natural gas, whether the current impact fee is already burdensome enough, and how much the energy industry — with natural gas prices at low points — can absorb additional taxes without resulting in the loss of investment and jobs.
These same basic issues are playing out at the federal level. A government hungry for additional revenue is looking at the energy industry for more. This is an industry that has created hundreds of thousands of well-paying American jobs, doing the heavy lifting in bringing our country out of the recession. Especially throughout rural America where there has been a steady decrease in population due to lack of job opportunities, and are now seeing a major turn-around in areas of energy development.
And due to recent technological breakthroughs and the discovery of new shale reserves, it is an industry that has been good for Pennsylvania. At the same time, new infrastructure is vital to fully embrace the shale revolution and to take advantage of record low natural gas spot prices. New capacity will not only transport affordable energy to underserved markets, but it will support continued production and all the related economic benefits to shale development.
It has been just more than a decade since drilling began here in the Marcellus Shale, and our nation has been so successful in accessing oil and natural gas in shale deposits that we have become the world leader in natural gas production. That success has brought lower fuel and heating prices to American families. It has helped to strengthen our national energy security and lessen our dependence on foreign governments that didn’t always like us much — but did like our reliance on their oil and natural gas.
The success of the American energy industry and its contribution to our economic growth has made it a target of federal attempts to raise energy taxes. To hear some in the Administration talk, you would think that this is an industry that isn’t pulling its own weight and that can absorb higher tax rates without affecting American families. But that is plain wrong.
Recent analyses have shown that the oil and gas industry’s average tax rate is 37 percent, much higher than the 24 percent rate for industrial companies and the 33 percent rate of financials. In fact, the average tax rate for the S&P index is 29 percent. Some companies have paid much lower rates (Apple at 14 percent recently, for example). So if lawmakers want to raise taxes for those who “aren’t pulling their weight,” they should focus elsewhere. Energy companies should not be the targets.
That hasn’t stopped the Administration from proposing new and higher tax policies for energy. One proposal would take away job-creation tax credits from energy companies, while leaving them in place for other manufacturers. Another would require American energy companies to pay taxes twice on their foreign earnings, putting our home-based companies at a significant disadvantage as they compete in world markets.
Higher taxes generally lead to higher prices, and attacking the energy industry would harm virtually every American family and business. We all fill our gas tanks and heat and cool our homes. We all buy products from companies that require electricity for manufacturing and fuel for delivery. Petroleum is a key component in products from plastics to fertilizers.
Our corporate tax rate is among the world’s highest. What we need is comprehensive tax reform at the federal level. And that reform should treat all industries fairly. Whether it is in Harrisburg or Washington, D.C., we cannot allow our government to pick some industries as favorites and bully others.
(Editor’s note: Peterson is a former Congressman representing Pennsylvania’s 5th District. He served in state government for 17 years and federal government for 12 years. During his time in Congress, Peterson helped revitalize and co-chair the Rural Caucus. He currently lives in Pleasantville.)
