Apr 10, 2014

A Taxing Tale

Guest Column By Lowman S. Henry

 

President Obama's claim that "If you like your health care plan you can keep your health care plan" was dubbed by pundits as the 2013 lie of the year. Fast forward to this year's gubernatorial campaign and two lies are competing for top honors.  Take your choice between: Governor Tom Corbett has slashed spending on public education; and Marcellus Shale gas drillers, unlike other states, are not paying high enough taxes.

 

Pollsters for the four remaining Democratic candidates for governor seem to have all discovered that education funding has surpassed unemployment and the melting polar ice caps as the main issue concerning likely voters in the upcoming primary.  Thus a happy convergence of the two lies has occurred.  The candidates can promise voters their cake - more education spending - and they can eat it too because they will tax the robber baron gas drillers to pay for it.

 

Setting aside the fact more state dollars are being spent on public education than at any time in the history of the commonwealth, let's focus on whether or not companies drilling in Pennsylvania's Marcellus Shale reserve are paying their fair share.  One candidate claims on his website that we are giving ". . . away our state's valuable resources without generating revenue for critical investments like schools . . . "  His television ads point out that gas drillers in Penn's Woods do not pay a severance tax as do companies operating in every other state in the union.

 

That is a true, but misleading statement.  Pennsylvania does not levy a severance tax, which is a tax applied on gas as it leaves the well, but the commonwealth does charge gas companies - as it does all other businesses - both a Corporate Net Income Tax and a Capital Stock & Franchise Tax.  We are the only state in the nation that levies both of those taxes.  That alone would place Marcellus shale drillers on an equal footing with the 49 other states.

 

But, it doesn't stop there.  Act 13 of 2012 imposed an impact fee on natural gas wells in Penn's Woods.  It is called a fee because Republicans supporting the measure did not want to be accused of raising taxes.  A rose by any other name, however, is still a rose.  The dictionary defines the word tax as "a sum of money demanded by a government for its support, or for specific facilities or services." Thus, the Marcellus Shale impact fee is, by definition, a tax.

 

The impact tax is levied based upon the price of natural gas traded on the market and on the age of the wells.  Thus the amount of revenue generated each year fluctuates depending on market performance and number of wells drilled.  According to the Allegheny Institute for Public Policy in Pittsburgh, the impact tax generated $204.2 million in revenue in 2011 and $202.5 million in revenue in 2012.  Less was generated in 2012 because the market price of the gas had decreased.

 

So, to put this into perspective, an industry that supposedly is not paying its fair share over the past two years paid every tax every other business in the state paid plus an additional $406.2 million.  What sort of outrage would there be if, for example, we asked farmers to pay an impact tax? They use natural resources - soil and water - to produce their product.  Or, perhaps to make it fair we should enact a "success tax" - in addition to Corporate Net and Capital Stock & Franchise taxes - on any business in Pennsylvania that expands rapidly and reaps higher profits?

 

The current political debate focused on adding another layer of tax on Marcellus Shale drillers implies, and in some cases outright states, that the gas companies are taking a natural resources and we are left with no benefit.  But the Allegheny Institute's analysis of where dollars from the impact tax have gone shows that a wide range of state agencies, county and local governments have received revenue from the tax.  These funds have gone to repair and replace local bridges, improve water and sewer projects, clean up acid mine drainage, pay for green space initiatives and watershed projects. Money has been set aside in the Environmental Stewardship Fund to pay for any future problems which may arise, and into community and economic development.  Counties - all 67 of them - have shared in over $21 million in revenue.

 

As in most political campaigns truth is the first casualty.  Candidates can certainly propose higher taxes, but they should at least not mislead voters. Instead they should tell the whole story and not just those parts of it that fit their campaign narrative.

 

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)

Mar 2, 2014

A War On The Truth



Commentary by Bob Dick

Should you be forced to subsidize government union politics? That’s the question asked by a reform gaining steam in Harrisburg called paycheck protection. But you wouldn’t know it by listening to government union bosses, who are deliberately misrepresenting paycheck protection legislation and engaging in personal attacks on its supporters in an effort to preserve their exclusive political privilege.

Pennsylvania law allows government union bosses—and only government union bosses—to negotiate the use of public resources to bundle union dues and political money and send it to union headquarters. In many cases, this dubious deal is made with politicians who receive contributions and campaign support funded by the same political money.

Paycheck protection would end this flagrant conflict of interest and level the political playing field for all.

Given their lucrative arrangement, it’s no surprise that government union leaders don’t want to play by the same rules as everyone else. They’ve launched a misinformation campaign to confuse the public and their own members about the details of paycheck protection.

For starters, they claim that only a few outside interest groups support paycheck protection. In reality, nearly 80 percent of Pennsylvanians—including 75 percent of union members—believe taxpayer resources should not be used to collect union dues and campaign contributions, according to a recent poll of likely voters.

Government union leaders also claim that paycheck protection is actually “Right to Work” in disguise. The truth is paycheck protection doesn’t affect government unions’ ability to collectively bargain. Even if paycheck protection were to pass, government workers—like most public school teachers in the state—would still have to pay union dues or fees or lose their jobs.

So, what would change? Government union leaders would simply have to collect their dues and campaign contributions directly from workers, rather than forcing taxpayers to do it for them. Either union bosses don’t understand the legislation, or they’re intentionally misleading their members and the public.

Another pernicious claim about paycheck protection is that it constitutes an attack on union members’ free speech. Nothing could be further from the truth. Paycheck protection does not stop government unions from spending money on politics; it merely removes taxpayers from the process of collecting their political money.

The U.S. Supreme Court agrees that paycheck protection supports, rather than violates, freedom of speech. In 2009, the court ruled in Ysursa v. Pocatello that Idaho’s paycheck protection law, which ended taxpayer collection of political money, “does not restrict political speech, but rather declines to promote that speech by allowing public employee check-offs for political activities.”

Indeed, requiring union leaders to collect their own political money would actually make them more responsive to members’ free speech rights.

Perhaps government union bosses’ greatest trick is claiming that dues cannot be used for politics. In reality, union dues fund a variety of political activities including lobbying, candidate endorsements, get-out-the-vote efforts, candidate and issue advocacy, contributions to “independent” political and partisan organizations, and fundraising for campaign contributions.

Pennsylvania’s major government unions spent nearly $5 million of members’ dues on lobbying and political activities in 2012—that’s according to their own reports to the U.S. Department of Labor.

Moreover, union Political Action Committee (PAC) contributions are also collected via public payroll systems. Government union PACs contributed an additional $4 million directly to candidates during the 2011-12 elections.

This perverse power cycle allows elected officials to sign checks giving money to union PACs and later accept campaign contributions from those same PACs!

Former State Senator Jane Orie was recently released from prison after being convicted of using public resources for campaigning. Why do we allow government union leaders to engage in the same behavior without batting an eye?

The debate over paycheck protection must be informed by facts, not half-truths or conspiracy theories from those clinging to their government-granted political privilege. Here’s the bottom line: Public resources should never be used for partisan politics.

Jan 4, 2014

Bill O'Brien and Penn State Were Never A Perfect Match


Now that the dust has settled, more and more details are coming out about why current Houston Texans head football coach Bill O'Brien deciding to leave the Penn State Football program after only two years as head coach. I'm sure many of you read the now infamous article by David Jones at the Patriot-News. If you haven't it is definitely worth the read. The article is a window into the frustration O'Brien felt that seem to intensified the last couple of months of his tenure with the program.

O'Brien refers to "Paterno People" in several provocative and immature statements in an off the record conversation. The article was only a glimpse of what was really going on bigger picture behind the scenes at Penn State. The truth is O'Brien was never really committed to Penn State and the administration at Penn State was never really truly committed to him.

From the very beginning we see this play out. Bill O'Brien was not Penn State's first choice to succeed legendary coach Joe Paterno. At the time the search committee were seeking out several other big name candidates like current Ohio State coach Urban Meyer. None of them would touch the program after the details of the Sandusky child abuse scandal came out and the possible threat of NCAA sanctions looming. So that left Penn State with a few third tier candidates remaining in their search. Thus they gave us Bill O'Brien.

Needless to say Penn State's announcement of Bill O'Brien as head coach was a surprise to many Penn State faithful. O'Brien did not have head coaching experience at the college level nor the NFL. He was relatively an unknown offensive coordinator for the New England Patriots whose big moment in the spotlight was when he got into a sideline argument with Tom Brady.Perhaps the most telling thing about the hiring was O'Brien was not a Penn State guy.

Former players and some fans of the program criticized the hire immediately. Many suggested he was not a Penn State guy and didn't understand the Penn State way. This was harsh criticism for a first time head coach at a big time college football program, but in the end it was true.

O'Brien was not a Penn State guy and did not understand the Penn State way.

I actually think the backlash against O'Brien's hiring wasn't stronger because the Sandusky scandal and the media circus surrounding the program left former players, fans and supporters stunned for a while. Eventually the fans and former players moved on with the attitude this is what we got and we are going to support our new coach. But I don't think O'Brien ever really got over it. Keeping highly respected coach Larry Johnson and Ron Vanderlindin on staff also helped.

Many O'Brien decisions along the way also proved he wasn't committed to the program either. He decided to put names on the back of Penn State jerseys. Although this was a direct assault on what the program stood for under Joe Paterno and drew some ire from former players who eventually came around and supported the decision. But it still was a sign that this guy didn't really want to understand the Penn State way.

Despite some really poorly coached games over his tenure, O'Brien and his agents kept wanting to renegotiation his contract. ALL THE TIME. First for more money then for a lower buy out option last summer. My sources at Penn State tell me that this truly started to get under the skin of Penn State Athletic Director Dave Joyner and others in the administration. In a way he held the program hostage. Add to this O'Brien willingness to interview for head coaching jobs in the NFL after his first year as coach and you have an equation that wasn't going to end well.

And as we can see it didn't. Many will argue that O'Brien leaving Penn State was a bad thing for the program leaving it again in a state of transition, but I would argue that pretty much sums up O'Brien's tenure as Penn State head coach, a perpetual state of transition.

Now Penn State is in a better position to find a coach that is truly committed to the program and Penn State. Something Bill O'Brien sadly never was.


Jan 1, 2014

Don't let the door hit you on the way out coach Bill O'Brien.


News is breaking today that Penn State coach Bill O'Brien is leaving the program to accept the head coaching job of the Houston Texans. I have been following the rumors all week and at first I wished O'Brien well until I read this article, by David Jones over at Pennlive this morning.

All the media outlets are praising O'Brien as the savior of the Penn State program during the harsh sanctions imposed by the NCAA, but when you set back an look at what he actually accomplished here, I personally am not impressed. I get the sentiment that he "held the program together" during tough times, but if a significant tool used in doing so was lying to the kids to keep them there, then I'm not sure that is as commendable as it otherwise might be viewed.

O'Brien when he first took over the program was smart. The first decision he made was to keep highly respected defensive line coach Larry Johnson and the top linebacker coach in the country Ron Vanderlinden. This no doubt was a big factor in keeping players like Mike Mauti at Penn State during the open transfer period of the NCAA sanctions.

During the past couple of years I've made it known on various social media platforms and message boards that I think Coach O'Brien's game planning and play calling probably cost Penn State five games over the past two season. Not good if you are a Houston Texans fan. Needless to say I've gotten a lot of grief from numerous state and local media personalities for my comments.

Now I'm starting to question Coach O'Brien's maturity level here after reading the Jones' article. Add it all up of what we have seen: The Tom Brady blow up as New England Patriot's offensive coordinator; dropping the F Bomb on national TV; O'Brien's handling of the Ron Vanderlinden situation; and now add the comments sited in the Jones article this morning. From what I have seen here this morning, I say good riddance to this guy. If I was a Texans fan, I'm not sure I would be really too excited about this guy being my next head coach at the NFL level.

I supported him as our coach, but I'm also excited about the opportunity to find a coach who wants to coach in the college game and who wants to coach at Penn State.

Oct 22, 2013

Why the Recovery Remains Sluggish

Guest Column by Lowman S. Henry

The last time more Pennsylvania business leaders felt the state's economy was headed in the right direction George W. Bush was just weeks away from being elected to his second term of office. The economy had largely recovered from the devastation of the September 11, 2001 terrorist attacks and the resulting economic slowdown.

It has been a downhill roller coaster ride ever since with employer confidence in the business climate hitting bottom in the spring of 2009 during the depths of the Great Recession. Despite the happy talk coming from both Washington and Harrisburg, those who actually run businesses say the economy is still getting worse, not better.

Every spring and fall for the past 18 years the Lincoln Institute of Public Opinion Research has conducted the Keystone Business Climate Survey. It has served as an accurate barometer of economic activity in the state. The survey depends not on government statistics - which are often subject to "revisions" - but rather directly asks the owners and chief executive officers who run businesses of all sizes about the economic climate they are actually experiencing.

In the fall of 2004, 28% felt the business climate was improving, while 21% said it had gotten worse. Fast forward to the spring of 2009 - the nadir of the Great Recession - and 76% said economic conditions had gotten worse in the preceding six months as opposed to just 4% who felt it had improved. The latest survey, conducted in September, found just 15% of the business owners/CEOs saying Pennsylvania's business climate had improved, with 41% saying it is has gotten worse. Another 55% felt business conditions had remained about the same, but - since the barometer was already at a historic low point that is faint praise.

The "recovery" from the Great Recession has been going on for nearly five years making it one of the longest recoveries in history. Why is it taking so long? The simple answer is that a wide range of government economic policies and regulations make it nearly impossible to do so. Nothing discourages business development and expansion more than uncertainty. From health care to tax rates to rapidly expanding regulation, Washington has served up more uncertainty than the economy can digest.

Obamacare is the biggest culprit. Seventy-eight percent of the CEO's surveyed said they expect their health care costs to increase under provisions of the Affordable Care Act. Obamacare is so solidly opposed by the business community that three-quarters said the law should be repealed. Prior to the start of the recent partial government shutdown 69% said congress should defund the Affordable Care Act even if a shutdown ensued, which it did. Republicans, of course, caved in leaving Obamacare intact. This survey was taken before the Obamacare enrollment period opened and the roll-out melted down under the weight of technical glitches.

Let's not blame just the federal government for the dour mood of Pennsylvania's employers and job creators. State government comes in for its share of the blame. The survey was taken just as legislators returned from a lengthy summer break having failed to take action on key agenda items including liquor privatization, transportation funding and dealing with the state's pension crisis.

The Keystone Business Climate Survey last spring revealed 85% of the CEO's supported privatizing the state's liquor stores. Sixty-nine percent opposed removing the oil franchise tax cap as advocated by Governor Tom Corbett and the Republican majority in the state senate. The September poll found 59% would rather take money from other parts of the budget to fund transportation infrastructure improvements than raises taxes or fees. There is also strong support among the business leaders for the state to move employees from a defined benefit to a defined contributions pension system.

Thus owners/CEOs find state government either not acting on key legislative items - such as liquor privatization and pensions - or acting in ways they don't support as transportation funding. Business leaders are also confronted with a Republican-controlled General Assembly and a Republican Governor who have failed to enact any labor power reforms. This leaves the labor playing field heavily tilted against job creators.

Looking ahead, by a two-to-one margin those engaged in actually running a business in Penn's Woods say they expect the state's business climate to continue getting worse over the coming six months. Given the inability of the national government to come to grips with debt and spending and the gridlock in Harrisburg there is ample reason to believe they are correct in their assessment.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)