Tax Day is met with a few groans and headaches from most Americans, but in Oklahoma, where the oil and natural gas industry generates an average $2.5 billion in state tax revenue, while accounting for 25 percent of all taxes paid, we should use this day to take stock of how much the energy industry supports the state’s economic health—and make a commitment to enacting sensible policies that will make our state attractive to all businesses for many Tax Days to come.
The oil and natural gas industry is proud to do its part in generating critical revenues for the state and municipalities. Rather than burden Oklahoma’s job-creators with higher taxes, policymakers should continue to find solutions that encourage investment and drive economic growth.
Here’s some potential policy choices to consider:
Broaden the Tax Base
There is no denying the state’s budgetary plans are heavily reliant on the oil and natural gas industry. Given the energy sector is a dynamic and cyclical industry that experiences downturns and upswings due to national and global commodity prices, we have warned time and time again of the dangers that come from the budgeting process being so dependent on production and operations in the state. Diversifying tax revenue sources would help the state manage the economic cycles that surely lie ahead.
Higher Energy Taxes Stunt Growth, Cost Jobs
Over the past few years Oklahoma lawmakers have enacted five gross production tax increases on the oil and gas industry—totaling more than $600 million in new direct taxes. The revenue generated is important for education and general operational funding, but it’s made Oklahoma have one of the highest tax rates in the region for the oil and gas industry—5.1 percent.
At the same time, growing so dependent on one industry means there is uncertainty for state funding when oil and natural gas prices fall or as rig counts decrease. Policy makers should continue to find ways to reform how our state allocates and spends its resources before deciding to implement additional taxes on Oklahoma job-creators.
Support Pro-Growth Policy
Lawmakers should take note of and support legislation that provides more certainty in Oklahoma’s business environment, such as HB 2150, attracting not only more oil and natural gas development but demonstrating that Oklahoma is a business-friendly state.
The bill, which is making its way through the legislative process, would recognize private property rights, reaffirm current state law regarding how oil and gas activity is regulated, and create more investment certainty—likely resulting in additional state revenue.