TAX NEWS - June 2010

Pennsylvania Democrats suddenly withdraw natural gas tax bill

HARRISBURG, Pa. -- Democrats abruptly yanked a bill to tax natural gas extraction and tobacco products from the Pennsylvania House floor Tuesday after a spirited debate that exposed internal divisions over what would constitute an integral piece of the state budget puzzle.

The setback for House Democratic leaders concerned their proposal to raise $142 million from Marcellus Shale natural gas drilling and use 80 percent of it for the state's general fund.

The $320 million bill, sponsored by Appropriations Committee Chairman Dwight Evans, D-Philadelphia, also would add a dime to the cigarette tax, bring in $49 million that currently goes to vendors who file sales tax returns on time, and impose new taxes on cigars and smokeless tobacco.

Democrats were clearly split on how much of the natural gas tax should go to local governments, environmental causes and other recipients, while Republican were roundly critical of the overall concept.

"This is an anti-growth tax, it's an anti-jobs tax, it's an anti-manufacturing tax," said Minority Whip Mike Turzai, R-Allegheny. "And it is an anti-energy-independence tax."

Rep. Daryl Metcalfe, R-Butler, said voters want to see taxes cut, not increased.

"Any increase in the tax burden hurts every taxpayer, because it increases the appetite of the monster in Harrisburg that keeps devouring tax dollars," Metcalfe said.

Rep. Dave Levdansky of Allegheny County, the first Democrat to speak against the bill, called it "a shameful attempt to generate as much revenue as possible for the state general fund."

"There are two major differences that I have with this bill," Levdansky said. "It's how you collect the tax and how you spend it."

"Expenses must match revenue," Evans told the members. "And if expenses don't match revenue, you must cut. And I assure you, it will be cut. If that's what you want, you're going to get cuts."

Evans and Majority Leader Todd Eachus, D-Luzerne, held an unusual meeting with Gov. Ed Rendell as debate was going on, and returned to the floor to say Rendell wanted the bill sent back to Appropriations. The House complied, 118-80, with nearly all Democrats joined by many of the Republicans' more centrist members.

Minority Leader Sam Smith, R-Jefferson, said developments indicated a consensus against taxes and in favor of spending controls.

"The non-vote was fundamentally a way of the members saying, 'Yeah, we're going to see where we can get with the revenues we have,"' Smith told reporters afterward.

Rendell hastily convened a news conference at which he maintained there were votes for components of the tax package and challenged Republicans to enumerate what existing spending they would cut to balance the budget.

"I'll be here all summer, if it takes it," Rendell said.