New York raises taxes but spurns big revenue hope

Bob Tippee
Editor

When clothing expenses rise later this year, New Yorkers can console themselves by quaffing unthreatened water.

The state legislature on Aug. 3 passed a distressed budget that, among other things, suspends a sales-tax exemption on clothing and footwear purchases of less than $110.

Yet the state Senate just a day later spurned a potentially large source of revenue by halting drilling permits for wells requiring hydraulic fracturing, a technique essential to completions in gas-rich shales.

Supporters of the permitting measure cite a range of hazards associated with drilling in New York’s part of the Marcellus shale. Largest among them is a supposed threat to drinking water.

If the state Assembly approves a companion measure, no permits will be issued before next May 15. During the hiatus, the government would study safety of the long and widely used completion method.

It should look first at New York history, which includes the drilling and completion of more than 13,000 oil and gas wells now on production. Nearly all those wells, points out the Marcellus Shale Coalition, have been fraced without contaminating subsurface water supplies.

If enacted, the Senate bill would stall and possibly lead to a ban on development of what could become a large source of royalty and tax income in a state that needs the money.

Facing a deficit of $9.2 billion, the legislature enacted tax hikes totaling more than $1 billion. Specific business taxes will rise, and very wealthy taxpayers won’t be able to deduct charitable contributions.

The new load can’t be good for business overall and therefore might not yield the revenue lawmakers expect. Time will tell.

An important question is how lawmakers in neighboring states see events in New York.

Pennsylvania, especially, has great Marcellus shale potential, as well as warnings of drinking-water doom.

Lawmakers there can treat the New York move as caution to be emulated or as a chance to produce extra gas for markets across the state line—and to make extra money. Either way, water will stay safe.

It seems like an easy choice.

(Online Aug. 6, 2010; author’s e-mail: bobt@ogjonline.com)

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