Manage economic growth by allowing region to keep money produced by oil and gas industry, not by raising taxes


By Jeff Essman, R-SD 28 Billings
Guest Opinion

  The drumbeat for higher taxes is again being manufactured in the State of Montana.  As usual, it starts with a policy paper issued by a liberal leaning think tank, gets taken up by various news outlets, and then becomes the topic de jour at various staged meetings.  This election season the call is for higher taxes on the oil and gas job creators justified by the “need to deal with local impacts that aren’t being met.”  But an examination of the facts demonstrates that higher taxes are not needed. Instead, simply let the oil and gas producing regions keep more of the money they generate to manage economic growth. 

It’s disingenuous to suggest that “impacts” in Eastern Montana can be solved by taking tax revenues generated there as happened during the last legislature! It’s nothing more than a naked power grab to confiscate the wealth that is generated and redistribute it to regions and spending programs that are addicted to government largesse. Is it the Montana way to seize the fruits of some other region’s labor, mimicking the divisive politics of Barack Obama who trades in pitting neighbor against neighbor for the sake of more government?
Here are the facts on oil and gas tax revenues and expenditures.  In Fiscal Year 2011 total tax revenues from oil and gas production taxes were around 220,000,000 dollars a year. That number does not include corporate income taxes, income taxes paid by employees of the companies and their small business suppliers and vendors, business equipment taxes, income taxes paid by royalty owners, or money the state receives from leasing its own lands or money from leasing federal lands. Of that 220 million dollars in oil and gas production taxes, a total of 115 million dollars (52.3%, the cream) came right off the top and went directly to a variety of state government accounts.  Of the remaining 105 million dollars, roughly 48 million dollars went to county governments, 53 million went to school districts, a quarter million to community colleges, but less than 4 million was retained by local governments through natural resource accounts.  And that last number is where the rub comes, as it is the local governments who need greater flexibility to address changes in population. 
In 2007 the Legislature passed legislation to enable oil and gas producing regions to deal with growth without tax increases . HB 823, carried by Democrat Representative Veronica Small-Eastman passed the House 86-14 and the Senate 47-1. It took a relatively small share of the taxes generated by the oil and gas regions and simply left the money with the counties to spend on roads and bridges. This bill would have addressed one of the major rationales proffered by those favoring higher taxes today.  HB 798, carried by Republican Representative Carol Lambert, would have transferred 10 million dollars a year from ongoing federal mineral leasing fees to an updated Coal, Oil, Gas and Energy Development Impact Board for grants to local governments, including cities and towns, so they could prepare for growth from “oil and gas development activity.” That bill passed the Senate on a bipartisan 28-22 vote and the House by an astounding 93-5. Shortsightedly, both bills were vetoed by Governor Schweitzer who wanted grain in the state government bin, not community bins. So the region has suffered from the decision to remove nearly 50 million dollars from their effort to deal with the growth they are facing.
We have a chance to get it right in 2013. Let’s leave the money in the region that has generated the greatest hope for our state economy, the very region where the work actually occurred, the very region that generated the taxes. We don’t need higher taxes on oil and gas job creators; we just need to allow the region that creates jobs and generates the revenue in the first place to put it to work in their communities.

Published May 9, 2012

Article Type: 
Guest Opinion

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