BCT Editorial – 4/10/11

This page was last updated on April 11, 2011.

Texas and taxes; Editorial; Beaver County Times; April 10, 2011.

In summary, this editorial is the latest in a continuing series lobbying for a tax on Pennsylvania natural gas extraction.

The editorial leads off with “Forbes.com’s article on best places to retire contained an attention-getting tidbit about Texas and taxes. It turns out that the Lone Star state isn’t the paragon of tax virtue that it's made out to be by its in-state boosters and out-of-state shills.” “Shills?” A clue the Times knows it’s on shaky footing is the name-calling. The editorial then provides the following quote from the article: “Evaluating jurisdictions for taxes can be deceptive. Texas, for instance, lacks a state income tax, an omission it touts far and wide in its economic development efforts. But the Lone Star State more than makes up for that with a hefty sales tax and the nation’s third-highest property tax (measured as a percent of fair market value). These taxes are not touted far and wide. Result: Texas ranks only in the middle on tax burden.”

As for the “hefty sales tax,” it’s a half-truth. The TX state sales tax is 6.25% compared to PA’s 6.0%. In addition to the state sales tax, “Texas cities, counties, transit authorities and special purpose districts have the option of imposing an additional local sales tax for a combined total of state and local taxes of 8 1/4% (.0825).” PA has something similar but limits the authority to only Allegheny (1%) and Philadelphia (2%) counties, for a total sales-tax rate of 7% and 8%, respectively, in those jurisdictions. Funny how the editorial failed to note this, isn’t it?

Getting to the Forbes assessment that “Texas ranks only in the middle on tax burden,” info from the Tax Foundation (TF) (a source often cited by the Times) tends to contradict that assertion. In “State-Local Tax Burdens,” TX ranks (smaller ranking is worse) 45th (7.9%) and PA 10th (10.1%). In “Tax Freedom Day by State, 2011,” TX ranks (smaller ranking is worse) 25th [April 7th (97 days)] and PA 11th [April 13th (103 days)]. In “2011 State Business Tax Climate Index,” TX ranks (smaller ranking is better) 13th and PA 26th.

Why is there such an apparent disparity between the Forbes article and the TF regarding Texas and taxes? Who knows, but remember the article is about “The Best Retirement Places.” It’s possible the Forbes assessment is specific to retirees and not applicable to the general population. Indeed, the article says, “Eleven states give special tax breaks to retirees, and we weigh that in our evaluations. This helps to earn spots for Lexington, Pittsburgh and Charleston, S.C.” Even so, PA wasn’t among the top 17 “states with the best tax climates for retirees.”

Was the Times aware of the Tax Foundation information? Sure, “Snow job” in January cited the “2011 State Business Tax Climate Index” report when the Times tried to convince us PA being 26th was “not good and … not bad. It’s average.”

In at least two ways the editorial attempted to deceive readers. First, the editorial took an assessment apparently targeted for retirees and wanted us to believe it applied to the general population. Second, the editorial failed to mention info its author(s) knew appeared to contradict the Forbes assessment.

So why the deception? As we’ve seen for years, Times editorials regularly lobby for more taxation to support more spending and/or to avoid spending cuts. In the case of the natural gas extraction tax, the Times takes the position PA should impose the tax because other states do it. In this case, the Times chose to use Texas as the “but Johnny does it” example. The problem for the Times was PA’s tax climate relative to TX is already significantly worse, at least according to the TF. Therefore, how do you lobby for a new tax when it obviously will make PA’s tax climate and competitiveness even worse? You hope an article like the Forbes story comes along so you can cite a credible source that says the Texas tax climate isn’t what it’s cracked up to be.

The editorial said, “By the way, Texas has an extraction tax on natural gas. It also underwrites its system of higher education through a tax on oil at the wellhead, a tax that is paid by consumers across the country.” This is true, but did the Times ever tell us its “extraction tax on natural gas” would be “a tax that is paid by consumers across the” commonwealth? Nope, opponents of Marcellus gas production tend not to mention that little fact and this editorial continued this behavior. In fact, the Times recently presented the new tax as a “bounty” for “the people of Pennsylvania to share.” As I’ve noted from the beginning, natural gas consumers (you and I) will ultimately pay any severance taxes via our gas bills. This means any severance tax is another hidden tax on you and me. It’s true for all so-called business taxes. The idea a severance tax is a “bounty” for PA taxpayers is hogwash.