The Oklahoma Policy Institute (OPI), a pro-tax policy organization, seems to be a little confused about what it wants when it comes to tax policy on oil and natural gas.
In the same day that OPI sent out an email calling for an increase in gross production taxes on the oil and gas industry, it included in its daily news update an article about the number of lost jobs in the oil and gas sector.
Does OPI want more people to lose their jobs or do they want less oil and natural gas produced? Or is it both?
A key point in OPI’s messaging for tax hikes is the claim the state is losing” hundreds of millions of dollars a year” on tax breaks to various industries that “may not be contributing to more jobs and investment.” This statement disqualifies the oil and gas industry from consideration of a tax hike, under OPI’s own qualifications.
The oil and natural gas industry provides about 1 in 7 jobs in the state of Oklahoma. Despite business adjustments that had to be made in a challenging commodity price environment, Oklahoma has remained competitive against other states in keeping industry activity going. The industry still accounts for the largest workforce of any other industry in the state.
As for investment, even in the downturn, Oklahoma oil and natural gas companies are spending billions in capital investment, particularly in the STACK and SCOOP plays.
Oklahoma’s tax rate has played an important role in making oil and gas production economical in the state. The evidence is in the fact that North Dakota, with the highest severance tax rate in the nation, has half the rigs operating as Oklahoma.
Gross production taxes are only part of the tax payments for Oklahoma’s oil and gas industry. Oil and natural gas companies also pay corporate taxes, income taxes and sales and use taxes, totaling about 22 percent of all tax revenue paid in the state. Yet, you won’t see OPI talking about all the taxes the companies and people working in the oil and natural gas industry pay.
There’s an economic truth that is universal. If you want less of something, tax it more. It’s pretty clear Oklahoma can’t afford less oil and natural gas production.
Cindy Allen joins the Oklahoma Oil & Gas Association after several years as an oil and gas communications specialist and editor and publisher of community newspapers in Oklahoma, Kansas and Arkansas.