Leaving Money on the Table: Pennsylvania Exceptionalism in Resisting Energy Severance Taxes

Abstract

Nearly all energy-producing states elect to adopt and sustain a tax on the extraction of their oil and gas resources through so-­called severance taxes, generating significant revenue for general as well as specialized state funds. Political support for such taxes generally crosses party lines and endures across multiple partisan shifts in the political control of a state. This reflects numerous features that tend to make these taxes quite popular and durable across election cycles. This long-­standing pattern, however, faces one major exception: Pennsylvania’s enduring reluctance to follow the path of other major energy-producing states and adopt such a tax. This article explores what it deems “Pennsylvania exceptionalism,” as it seeks to address the issue of why one leading energy-­producing state would refrain from tax adoption in contrast to every other such state. It places particular emphasis on the past decade, in which natural gas in shale deposits has triggered a dramatic expansion of production in Pennsylvania and ongoing political controversy over whether or not a severance tax should be adopted.