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Kasich’s plan to tax success of gas boom makes sense

May 4, 2012
Salem News

When Gov. John Kasich suggested a tax break for Ohioans, based on changes in revenue from oil and gas drilling, he hinted strongly he did not expect legislators to approve it immediately. He was right.

Kasich included the provision in his proposals for midterm amendments to the state's two-year budget. But Republican leaders in the state House of Representatives have decided the idea needs more study. They do not plan to act on it this year.

New taxes that place an onerous burden on businesses are a bad strategy, of course. That is especially true in times such as these, when the country still is fighting off the effects of a recession.

But the governor's proposal should not be detrimental to Ohio's competitive position in gas and oil drillling.

Current state severance taxes are 20 cents per barrel of oil and 3 cents per million cubic feet of gas. Kasich wants severance taxes of no more than 4 percent on oil and natural gas liquids and 1 percent on gas.

Oil is selling for around $100 a barrel, so 20 cents certainly would not break the backs of drillers. And though gas prices are at decade-long lows, some drillers actually would pay less under Kasich's plan.

While it is difficult to compare state-by-state tax rates on oil and gas, because there are levies and permit fees to consider in addition to severance taxes, it appears the Kasich plan would keep Ohio competitive in comparison to nearby states such as West Virginia and Pennsylvania.

Meanwhile, higher revenue from severance taxes could be used to give Ohioans an income tax break - as much as $1 billion a year. What's not to like?

Apparently, some legislators worry about upsetting oil and gas drillers' apple carts. Kasich thinks inaction will allow energy companies to reap billions of dollars in profits in Ohio, leaving state residents with the equivalent of a few well-gnawed apple cores.

He is right. Legislators should reconsider his plan - if not now, then at their next opportunity to amend the budget.

 
 

 

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