In the face of the state’s budget shortfall and the recent electoral defeat of a governor opposed to severance taxes on shale gas production, the possibility of replacing the current impact fee with a severance tax in Pennsylvania has once again become a hot topic of debate. Opponents of a severance tax fear killing the goose that lays the golden eggs, but our analysis shows this to be an unjustified concern: A severance tax would not drive Marcellus drillers from the state.

It all comes down to return on investment: If the internal rate of return of a well is greater than the cost of borrowing the capital to drill the well, the driller will bring new wells online. Very large energy companies can borrow money almost as cheaply as the U.S. government — at an interest rate of 2 percent to 3 percent — whereas smaller companies pay up to 6 percent.

Based on our analysis of state records and academic studies, the small reduction in the internal rate of return under a severance tax still would leave profits well above the cost of borrowing for either large or small firms: A typical well drilled in 2015 and starting production in 2016 would generate a return of 12 percent with an impact fee and 11 percent with a 5 percent severance tax.

Furthermore, while the impact on the driller would be small, the relative impact on the commonwealth would be large: Producer income over 15 years from our generic well decreases from $1.8 million to $1.4 million (20 percent) due to the tax, but Pennsylvania’s receipts increase from $380,000 to $820,000 (116 percent). In aggregate, this additional revenue is significant. The liberal Pennsylvania Budget and Policy Center estimates that such a tax could raise $611 million more than the impact fee next year alone.

These results assume that producers receive $3.90 per 1 million British thermal units of gas in 2016, with 5 percent annual price increases after that — assumptions based on the Energy Information Agency’s most recent Annual Energy Outlook and the fact that Pennsylvania producers are likely to receive a lower price than the widely quoted Henry Hub benchmark. However, even if prices fall in the short run and rise more slowly in the longer run, a severance tax would have little effect on returns, depressing them by no more than a percentage point.

The bottom line is that a severance tax would not reverse investment decisions: Players who can borrow cheaply would still make money, while others would already be struggling — a consequence of low natural gas prices, not the tax.

Some argue that the industry already pays its fair share via Pennsylvania’s impact fee and corporate net income tax, but let’s look at how this “fair share” actually stacks up.

The Pennsylvania Budget and Policy Center estimates that natural gas produced in Pennsylvania in 2013 was worth $11.8 billion. Drillers paid an impact fee of $223 million in the same year for an effective rate of 1.9 percent — lower than that faced by drillers in such shale-friendly states as Texas, Arkansas, West Virginia and Oklahoma.

There are also very strong reasons to believe that companies pay very little or none of Pennsylvania’s 9.95 percent corporate net income tax. Companies can take advantage of federal and state rules that allow them to whittle their taxable income down to well below what they actually earn. For instance, Range Resources recently reassured its shareholders that it does “not generally pay significant state income taxes” due to net operating loss carryovers and intangible drilling-cost deductions.

Should any net income remain after these tax breaks, it is perfectly legal, and not very difficult, for a company to structure itself such that all its profits are booked in a state (e.g., Delaware) that does not impose state income taxes.

The shale gas industry and its cheerleaders might argue that paltry tax payments are counterbalanced by job creation in the commonwealth. Claims range from a “modest”180,000 jobs to as many as 300,000. In fact, Pennsylvania’s Department of Labor and Industry has put the number at 18,007 jobs in core Marcellus industries and 5,611 jobs in ancillary industries — a grand total of 23,618 jobs.

Of course, the expenditures of these workers on Pennsylvania-produced goods and services helps support additional jobs in the state. But only patently unrealistic assumptions would allow us to convert this modest number of jobs into the enormous employment bonanza claimed by the industry’s strongest supporters.

Contrast this figure to the 45,000 public-sector jobs that have been lost to deep state budget cuts in recent years. Herein likes the paradox behind the argument that a severance tax would kill the golden goose: Such a tax would actually increase the size of the “golden egg” benefiting Pennsylvanians.

A modest severance tax could have generated sufficient revenue to keep Pennsylvania teachers, police officers and first responders in their jobs. They not only play critical roles in our lives, they also buy Pennsylvania products and services.

We could have had our shale gas boom while continuing to live up to our moral obligation to provide for the future of the commonwealth, too. National media coverage of the disgraceful collapse of public education in Philadelphia — a product of draconian state budget cuts — bears witness to the losses we can never undo. Thousands of children across the commonwealth have had their education shortchanged by the Tom Corbett administration’s choice to prioritize driller profits over our children’s future.

We can choose differently going forward. The economic reality is that a modest severance tax would not prevent industry from taking our state’s shale gas out of the ground and selling it to an energy-hungry world. Producers are not so stupid that they’d leave money on the table.

The tax would create a steady revenue stream precisely when Pennsylvania needs one. Now that the biggest obstacle to such a tax — Tom Corbett — is on his way out, the state should implement such a tax at the soonest possible moment, thereby strengthening the long-term prospects of its citizens.