Gross Production Tax Eyed As Solution To State Budget Woes
Oklahoma's budget writers continue to struggle with how to cover a $900-million revenue shortfall. Raising the Gross Production Tax remains on the table and is highly controversial.
Around 10 years ago, gross production tax put over a billion dollars a year into the state treasury. It's now a third of that, less than $400-million last year.
That's due, partly to the drop in commodities prices, but also to lawmakers cutting the tax rate from 7 percent to 2 percent for a well's first three years, which is when most production occurs.
Getting rid of the 2 percent incentive rate and going back to 7 percent across the board is being pushed by some as a way to help balance the budget. But many in the industry say, in the midst of a recovery would be a terrible time to raise production taxes, and besides, they already pay plenty.
“The thing that frustrates me the most, that I feel like is not being reported, is the contribution that oil and natural gas already makes to the state's coffers, we pay 25-percent of all the taxes,” said Tim Wrigley with the Oklahoma Independent Petroleum Association.
That 25 percent figure comes from a couple of studies, and is based on the combination of gross production tax, corporate tax, sales tax and personal income tax paid by oil and gas workers.
Gross production tax by itself currently accounts for just three percent of all state tax revenues.
Some of Oklahoma's long-time producers are leading the push to raise the tax to 7 percent, saying, even with that, Oklahoma's effective tax rate would be less than those in the other big producing states like Texas and North Dakota.
What's more, they say, taxes don't determine where you drill. You drill where the oil is. We'll be watching to see what happens with this.