Oklahoma Policy Institute released the following statement in response to Republican leaders’ new budget proposal:
The proposal announced today by Republican leadership does not address the hundreds of millions Oklahoma is giving away each year to the oil and gas industry. Oklahoma’s effective tax rate on oil and gas drilling is less than half what it is in peer states. Phasing out the state’s generous tax break on drilling after 18 months instead of 36 months would bring in nothing to close next year’s budget shortfall. In future years, this proposal would continue the tax break during months when wells produce 35 to 45 percent of their total 10 year production.
Oklahoma can legally change a higher tax rate on oil and gas production in exactly the same way as Republicans are proposing higher taxes on cigarettes and motor fuels. As a recent memo by Oklahoma tax experts Jerry Johnson and Michael Clingman explained, “The gross production tax is a tax on production and the incidence of the tax occurs when the oil or gas is actually produced. It is appropriate to adjust the rate for future production.”
Restoring the historical tax rate of 7 percent would bring in as much as $313 million for next year’s budget. Restoring a 5 percent rate would bring in as much at $198 million.
A balanced approach to fixing our budget cannot only include revenue increases that fall most heavily on moderate- and low-income Oklahomans while leaving in place tax cuts that primarily benefit the wealthy. In addition to restoring the historical gross production tax, other measures like ending the capital gains exemption, limiting itemized deductions, and restoring the Earned Income Tax Credit need to be part of the mix.
Many of the options being ignored by Republican leadership have broad popular support. The latest proposal leaves these good options on the table for no legitimate reason. Lawmakers need to do better to develop a budget that puts Oklahomans first and saves our schools, public safety, health care, and other vital services from deeper cuts.