There are many lawmakers and politicians in Harrisburg who would say that providing a legitimate, state-wide severance tax on the production of Marcellus Shale gas would cause job loss, encourage companies not to invest in Pennsylvania, and force gas companies to “take their ball and go home.”
That mentality is contradictory to reality.
We have an example here in Pennsylvania that proves this theory wrong — that proves a fair and equitable tax on an industry does not result in negative outcomes. Especially when the commodity taxed is something only Pennsylvania can offer.
Pennsylvania currently taxes the gaming industry at 55 percent on all money bet at the state’s 12 operating casinos. Yes — 55 percent of all revenue generated by slot machines in Pennsylvania goes to the state. And, an additional 16 percent from table games is directed to state coffers. This isn’t on profits or “income,” but on every dollar wagered in Pennsylvania. And it’s in addition to other state taxes imposed on all businesses in the state.
Yet we don’t see the casinos running for “greener” pastures. Actually, we see them investing more money into our people, into our workforce and into our local economies. In fact, Philadelphia had six applicants for its current vacant casino license — all eagerly willing to pony up a $50 million licensing fee in addition to the hundreds of millions of dollars each applicant plans to invest in their casino projects.
And it’s simple why this is happening because the ability to operate a casino is here in Pennsylvania. Even among emerging competition from New York, Maryland and Ohio, industry leaders are still willing to invest in Pennsylvania.
The same logic must be applied to our natural gas industry. Gas companies know that Marcellus Shale gas is here in Pennsylvania. It’s not in Nevada. It’s not in California. It’s not in the Carolinas. It’s right here in the Keystone State. And the taxpayers of this commonwealth deserve a fair and equitable severance tax that will require big oil and gas companies to pay their fair share.
The notion that gas companies are going to leave and take their jobs with them is simply false. Just ask the tens of thousands of Pennsylvanians employed at our casinos and the tens of thousands more who are employed as a result of Pennsylvania’s casino industry.
A recent study by the Legislative Budget and Finance Committee revealed that the overall economic impact of casinos in Pennsylvania is significant. Casinos support nearly 25,500 jobs and produce more than $3 billion a year in total economic output. All of this with an effective tax rate of 55 percent on slots and 16 percent on table games.
We did the right thing with gaming — we put in place a tax structure that provides significant revenue and yet allows the industry to thrive. In fact, Pennsylvania’s casinos have leapfrogged New Jersey and now rank second in the nation in gaming revenue. And we are first in the nation — ahead of both Nevada and New Jersey — when it comes to taxes generated from gaming.
To continue the mantra that a fair and equitable severance tax on Marcellus Shale natural gas drilling will force these companies to leave Pennsylvania is simply not true. With a $1.7 billion budget deficit facing the state next year, Pennsylvanians can no longer afford to give away our resources with nothing in return. The revenue generated by a meaningful and effective severance tax could provide hundreds of millions of dollars in additional funding for struggling school districts across the state — the burden of which has been passed on in the form of higher local taxes and cuts to services for students.
Not implementing a severance tax on natural gas in Pennsylvania is simply not in the best interest of our taxpayers. It’s not in the best interest of our middle-class families. And it’s just not good business. Because we know that if you build it, they will come, and they will pay their fair share. Just look at the state’s 12 licensed casinos.
Rep. Rosita C. Youngblood represents the 198th Legislative District and is the Democratic chairwoman of the House Gaming Oversight Committee.