Governor revises severance tax hike
Gov. John Kasich rolled out a document Tuesday that calls for an income-tax cut offset partially by increases in tobacco, severance and commercial activity taxes.
Like the federal budget unveiled by President Barack Obama last week, Kasich’s proposal primarily may be an election-year policy statement. And while this is at least the fourth attempt to raise the tax on oil and gas drilling in Ohio, it does have a new aspect that could make it more attractive.
The oil and gas industry lobbied against previous moves to raise the tax on natural resources being extracted from the ground beneath the state.
But that opposition could be counteracted by pressure from constituents – particularly those in local and county elected office in areas where drilling is being done. The incentive: Kasich’s proposal would steer some 20 percent of severance tax revenue to the governments in counties where the shale oil and natural gas are being produced. That would help local governments deal with wear on roadways and other costs due to drilling activity.
So far, more than 1,000 permits for wells have been issued in the Utica Shale region. Nearly 700 have been drilled, with almost 300 already in production.
A modest change in the severance tax would not dampen the energy boom. It would not curtail drilling or construction of pipelines and processing facilities.
More important to voters, it could allow continued, though perhaps temporary, income tax relief.
It’s still far from certain whether oil and gas producers – which already pay the commercial activity tax and a half-dozen other fees and levies – will avert a hike in the severance tax.
But the policy proposals highlighted by Kasich Tuesday will fare better in the Republican-controlled Legislature than Obama’s budget will in a divided Congress. Don’t write it off.