By more than a two-to-one margin, Oklahoma voters oppose the state’s tax breaks to oil and gas companies for horizontal drilling, according to a recent poll of registered voters.
The poll, conducted in late April by Global Strategies Group, provided respondents brief arguments for and against horizontal drilling tax breaks and then asked them whether they “support or oppose providing tax breaks to oil and gas companies for horizontal drilling.” Nearly two-thirds of respondents oppose these tax breaks (65 percent), while less than a third support them (28 percent). Oklahomans of all political stripes oppose the tax breaks, with a clear majority of Democrats (79 percent) and Independents (68 percent), and a plurality of Republicans (49 percent compared to 43 percent), in opposition.
Currently, Oklahoma taxes horizontal drilling at only 1 percent for 48 months after initial production, compared to the regular tax rate of 7 percent. As a growing share of wells in Oklahoma are drilled horizontally, the cost of the tax break has escalated rapidly. The state now provides over $100 million annually in tax breaks for horizontal drilling, and this cost could balloon to as high as $400 million annually without legislative action. Under current law, the horizontal drilling tax break is set to expire in July 2015.
The poll also finds a clear majority of voters in favor of eliminating the tax break so as to provide increased funding for important state programs. Nearly three in five voters (59 percent) prefer that the state “eliminate the drilling tax breaks in order to provide more funding for education, public safety, highways and other state needs.” Only one in five (21 percent) wish to “keep the tax breaks for horizontal drilling,” and only one in ten (9 percent) want the revenue used to pay for a cut in Oklahoma’s top income tax rate.
This finding that Oklahomans favor investments in key public services over tax cuts reinforces results from the same poll reported earlier in May showing that a strong majority of Oklahomans oppose cutting the state’s top personal income tax rate when they are informed that it will leave less money to fund education, public safety and health care. After voters were informed that the one-quarter percentage point cut in the income tax would reduce revenues for state services by $125 million, just 34 percent supported the plan with 56 percent opposed (including 44 percent strongly opposed).
Compared to the strong support for eliminating the tax preference for horizontal drilling, the poll found considerably weaker support for doing away with tax breaks more generally. Asked their opinion on proposals to “reform Oklahoma’s tax system by eliminating various tax credits, deductions and exemptions for business,” only 38 percent support eliminating tax preferences, compared to 45 percent who are opposed.
As Oklahoma struggles to address urgent funding needs in a context of chronic underfunding and waning federal support, policymakers have no choice but to re-examine how we tax horizontal drilling. As we have argued previously, the generous tax breaks that Oklahoma gives for horizontal drilling are unnecessary and unaffordable. This poll shows that whenever policymakers gather the political courage to take on the powerful interests defending the status quo, the voters will be solidly with them.
Note: This poll was conducted by Global Strategy Group (GSG) among 601 voters registered in Oklahoma on April 25-28, 2013. The margin of error on this poll is +/- 4.0%. The margin of error on subsamples is larger. GSG is a leading public opinion pollster whose clients include elected officials across the country at all levels of government, major non-profit institutions and Fortune 500 companies.