Fee = Tax

Posted by By at 2 June, at 12 : 55 PM Print

In late 2003 I made the trek most Republican candidates make, down to DC to meet with Grover Norquist’s Americans for Tax Reform.  As a new candidate in an already crowded field, I was anxious to start staking out ground that would help define my positions as conservative in a conservative district in a conservative time.  And in 2003, that meant getting down to ATR first to sign ATR’s Taxpayer Protection Pledge.

The pledge is a fairly simply document, and its wording changes based on the office you seek.  In my case I pledged to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses” and to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”  Signing it was easy for me – I was (and remain) opposed to raising taxes as a way to fill in holes created by excessive government spending.  I believe that government – like a hermit crab – will always seek to grow larger and raising taxes just gives them a bigger shell to outgrow.

So, in front of such noted conservative luminaries like John Fund and Grover himself, I introduced myself, talked about my race for two minutes, signed the pledge, and got my round of applause and press release.  I imagine – with the noted exception that Tom was probably afforded more time to speak, understandably – that the scene was fairly similar to the governor’s trip last year.

That Governor Corbett signed the pledge is really no shock – he was and is an admitted fiscal conservative who does not want to raise taxes.  And had the legislature and the Governor made good on their “agreement in principle” to pass a Shale tax last cycle we might never have heard about ATR and its alleged sway over Pennsylvania politics.

But we know that didn’t happen, and suddenly “the Pledge” has gained a lot of notoriety over the past few days, especially when Grover sent a letter proclaiming that a fee is a tax as a tax is a fee.  That pronouncement has cast the carefully parsed out language of Sen. Scarnati’s Marcellus proposal into a stark light and has made clear any support for it will violate “the Pledge.”

So let’s start with the first question:  is a fee a tax?  The answer is of course it is.  If government requires you to pay a sum of money to engage in an activity, call it what you will, it is a tax.  It is a tax in effect if not in name.  Just like increasing a required fee at a college is essentially a tuition increase, imposing a fee on an industry’s activities is a tax.

But that isn’t the end of this story, at least in my mind.  Pledge or no, the shale proposal is a fee/tax/“cost of doing business” that even Grover’s hero, Ronald Wilson Reagan, would understand and support.  After all, RWR firmly believed that limited taxes (like a liquid fuels tax) reasonably connected to the use of the revenue made for good policy, not pure folly.

See, while a tax is a tax in its effect, the purpose and use of that tax can render it a conservative act to impose.  Fairly considered, which course is more conservative:  taxing the industry that creates the unavoidable impacts to raise the funds to remedy them, or using limited state funds taken from all wage earners to remediate industry specific impacts?

No one wants the gas industry more firmly entrenched in Pennsylvania’s economy than I; that said, I also do not want that industry to leave behind a huge unfunded bill for my kids and grandkids – a bill we were left from the coal and steel industry that we have yet to finish paying (and if you think I am wrong, go look at the streams and rivers around Johnstown).  The time to capture the funds to meet these externalities – i.e., water treatment, infrastructure improvements, and a decommissioning fund for abandoned wells – is now.

Yes, it will violate “the Pledge” to do so, and I am all for keeping one’s word.  But the name of the document is “The Taxpayer Protection Pledge,” and in my mind that means current and future taxpayers.

By not capturing the funds to remedy these industry created externalities, we are passing a tax bill down the line.  After all, like coal, someone will have to pay to clean up the mess that any large-scale operation leaves – even when it is run flawlessly.  The right place to capture those costs is from the operation itself, not from future taxpayers.

The simple fact is imposing the fee now is good policy, good politics, and the conservative course – regardless of claims to the contrary.

Photo by bronayur


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- who has written 77 posts for Rock The Capital
Scott Paterno is an accomplished policy analyst and political consultant based in Hershey, PA. Mr. Paterno, never one to sit still, has practiced law, run for a house seat, and worked as lobbyist in Harrisburg and Washington. Paterno is Vice Chairman of the Sustainable Energy Fund and is currently pursuing a master’s degree in Political Science. He is happily married with three children. - Email scottp

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