The House Appropriations Subcommittee on Fiscal Policy Thursday held a hearing on Pennsylvania’s tax structure and heard recommendations for tax reform and tax reductions.

One of the most significant recommendations came from Pavel Yakovley, Associate Professor of Economics at Duquesne University, who said legislators should “consider increasing state reliance on user fees and charges, as well as corrective taxes on negative externalities like pollution and environmental degradation” to offset the possible revenue losses from tax cuts.

Yakovlev said “Corrective taxes on negative environmental externalities are also desirable from an efficiency standpoint because they force the market to internalize the costs that pollutants impose on society.

“However, the challenge with corrective taxes is that they should be set equal to the marginal damage, which is hard to estimate objectively in many cases.

“This is a particularly thorny issue when it comes to assessing what kind of taxes should be levied on natural gas extraction: a fixed impact fee per well or a severance tax per unit of gas extracted? 

“From a societal perspective, if negative externalities are proportional to the number of wells drilled, then the tax should be structured more like a fixed impact fee per well. However, if externalities are proportional to the volume of gas extracted, then a severance like tax per unit of natural gas might be more appropriate.”

In response to a question, Yakovley said he is not generally in favor of film production tax credits because they end up being a giveaway because the jobs created by film productions only last 28 to 31 days with limited benefits.

Pennsylvania presently gives away $65 million a year in Entertainment Production tax credits.

Robert Strauss, Economics & Public Policy Professor at Carnegie Mellon University, said in response to a question, Pennsylvania faces a “demographic tsunami” because Pennsylvania’s income-producing population is decreasing while the elderly population is growing.

Strauss said not dealing with this issue will lead to a situation in Pennsylvania similar to the opioid crisis.

Click Here to watch a video of the hearing.

Rep. Warren Kampf (R-Chester) serves as Majority Chair of the Subcommittee on Fiscal Policy and can be contacted by sending email to: wkampf@pahousegop.com and Rep. Peter Schweyer (D-Lehigh), serves as Minority Chair of the Subcommittee, and can be contacted by sending email to: pschweyer@pahouse.net.

(Based in part on reporting by PA Legislative Services.)

NewsClip:

Robert Swift: Lawmakers Hear State Tax Reform Proposals

[Posted: Jan. 19, 2018]

1/22/2018