A Bridge Too Far

You may have read how a small group of Oklahoma City businessmen have gotten together to reform Oklahoma. Well, reform may be too much of a stretch since solving the budget crisis is more than raising taxes.

The group formed an LLC and created an official name, “Step Up Oklahoma.”  It also set up a website to explain the tax policies it supports to balance the budget and the reforms necessary to stave off future crises according to the Journal Record.

David Rainbolt explained that “We need a courageous path forward, and that means compromise.”  His plan would implement tax increases on tobacco, motor fuels, both petroleum and wind energy companies, gambling activities and personal income.

The plan also calls for giving more power to the governor on appointments, changing the judicial nomination process and giving all teachers an across the board a $5,000 raise.

The special group of Oklahoma City businessmen included not only David Rainbolt, but Larry Nichols of Devon Energy, Greg Love of Love’s Travel Stops and the CEO of The Oklahoman, Gary Pierson.

Also joining the group is the Oklahoma Center for Nonprofits, which provides advocacy training, consultation and networking services for its more than 1,000 members.

The Oklahoma Energy Producers Alliance has agreed to switch from opposition to support – as long as Step Up Oklahoma follows through with an agreement to make certain changes in its plan.  One part of the plan calls for establishing a 4 percent gross production tax rate for the first 36 months after a well that has been out of production for at least one year is put back in service.  The 4 percent tax would also apply to oil and gas produced from new formations in “existing well bores that have not been tapped before.”  Rates would go up to 7 percent after 36 months.

You may recall that it was only 2016 that Oklahoma University President David Boren proposed a $650 million sales taxes increase for education.  Fortunately, his idea was soundly defeated.  Had his proposal been implemented, Oklahoma’s sales tax would have been one of the highest in the country.  Such a prospect would be bad for industry recruitment and individuals locating to Oklahoma.

The same can be said of raising the gross production tax.  These oil and gas associations may well be working against their members by agreeing to an increase, which may well make marginal wells unprofitable.

As reported in the Tulsa World, economist Mark Snead said the broader tax picture shows the oil and natural gas industry in Oklahoma has a tax burden near the average among oil-producing states.

“We are not a low tax state,” he said.  “We are toward the high end and raising severance taxes even further pushes us toward being noncompetitive, the area where we could be considered and extremely high tax state.”

Oklahoma Independent Producers Association President Tim Wigley said, “Depending on how much the gross production tax could be raised, we could find ourselves with one of the highest oil and gas tax systems in the country.”

The idea of raising $800 million in revenue – raising measures with no real fiscal reforms  – is simply a bridge too far.  The elimination of school districts and reforms to county government must be on the table.

Summing up the prospects for Step Up Oklahoma David Blatt of the Oklahoma Policy Institute said, “There is no doubt that the group has good intentions,” but he expressed concerns about its homogeneity.  “I don’t think they made any effort to convene a diverse group,” he said.  Mr. Blatt is of course right.  Oklahoma is a poor state and raising taxes only makes it poorer.