The Fracking Tax Flight Fallacy

Mike Sturla explains that PA has the gas drillers by the balls:

Rep. Michael Sturla of Lancaster County said industry leaders have, during testimony in front of his committee, said they would not leave Pennsylvania even if the state’s fracking tax is 1 percent higher than the highest gas drilling tax in the country.

“Frankly, they have been more forthcoming than some of our politicians who have said (the industry) would leave,” Sturla said. “I don’t think it’s the industry that’s the bad guy. It’s other people who are standing in the way.”

Sturla made the comment less than an hour after Gov. Tom Corbett told a Chamber of Commerce gathering just a few miles away at DeSales University that there “can’t be” a gas drilling tax in Pennsylvania, presumably repeating the theory that taxation will chase investment and jobs away.

You’ll recognize Corbett’s claim that gas drillers will flee attempts to tax them as a version of the conservative argument that a Millionaire Tax would be pointless since millionaires would just flee the state, or that corporations would flee the state if we closed the Delaware loophole.

And just like those claims, it’s not true. Drillers need to be in Pennsylvania to drill for Pennsylvania’s gas. They can’t get Pennsylvania’s gas from Ohio, so they need to pay Pennsylvania taxes. Yes, there is a level of taxation that would make it unprofitable to drill at all, but the drillers are straight up telling Mike Sturla that PA would still be in the safe zone if its tax was 1% higher than the rest of the states.

Translation: PA has the drillers by the balls. Harrisburg can, and should, extract as much revenue from this practice as they possibly can because it’s a captive industry performing a very environmentally destructive activity. The revenue could be used to close the revenue shortfall, and then lower the sales tax.