North Dakota Democrats: Cutting Taxes Is “Radical” And “Reckless”

oilwell

Senator Dwight Cook’s proposal for reform of oil extraction taxes has created some surprising bi-partisanship in criticism. Earlier this week former Governor Ed Schafer, who campaigned for reforming the state’s oil extraction tax during the 2011 session, was critical of Senator Cook’s proposal here on SAB. Schafer didn’t like that the bill raised taxes on the oil industry.

Now Democrats are joining in the criticism. Senate Minority Leader Mac Schneider is calling the plan “radical” and “reckless” because “the measure could cost the people of North Dakota more than $595 million in the first five years.”

Leave it to a Democrat to describe tax cuts as “costing” people money. Tax cuts might (but not always, dependent on the economic conditions cost the government revenues, but tax cuts don’t cost the people anything. Tax cuts leave more money in the private sector.

One thing most Republicans in the state agree on, I believe, is the idea that the state needs some form of tax reform. The oil extraction tax in North Dakota is one of the highest in the nation, and it has “triggers” in it based on oil prices which make the rate for the industry, and the revenues for the state, variable. What reformers are mostly looking for is a consistent, somewhat lower rate.

But Democrats reject the need for any such thing. “The fact of the matter is in the last six years under our current tax structure North Dakota went from being the ninth largest oil producing state to the second top producer,” Assistant House Minority Leader Corey Mock told WDAZ. “Again, all under this tax structure. So to say that our tax structure is unfriendly to oil development is untrue.”

What Mock is conveniently ignoring is the changes in America’s oil markets over the last couple of years. More shale plays are open, in weather and tax climates far less adversarial than North Dakota’s. The Bakken might have been the “only game in town” up until now, but that’s changing and there’s a case to be made for making the state’s taxes more competitive.

A $100 million/year reduction in taxes on the oil industry is a drop in the bucket compared to the billions of revenues they’re pumping into state coffers. But it would be an important policy change for the industry, resulting in a far more predictable and slightly lower tax rate.

Senator Cook’s overall plan has some objectionable line items, which Governor Schafer pointed out, but overall the state needs oil tax reform. That debate should be approached with cool heads and rational thinking, not this sort of class war against evil “big oil” the Democrats are pushing.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • http://Sayanythingblog.com The Whistler

    Think of all the good things the oil industry is doing for us living in North Dakota.

    Now imagine what kind of dick you have to be to treat them like they are the enemy.

  • Captjohn

    Rob you are right. It isn’t the states money. Not many Democrats get that.
    I think Sen. Cook’s proposal is a good start on a discussion that needs to take place.
    A long with your arguments, how long will Mr. Obama continue to line the pockets of BNSF and his pal Warren Buffett, by not approving the Keystone pipeline.

    • two_amber_lamps

      Taxes are (to government bureaucrats) an entitlement. The thought of cutting their “benefits” is as outlandish to them as talk of cutting welfare benefits to layabouts. What’s shameful is in this state, the cloth (lib/dem, “conservative”/rep) the bureaucrat is cut from seems to be irrelevant.

  • http://nofreelunch.areavoices.com/ Kevin Flanagan

    The North Dakota tax system has been chaotic for several years now. It has made it impossible to do any sort of financial planning.

  • BismarckBigfoot

    The extraction tax is also taken right out of the mineral owners cut. Let’s supose a mineral owner is to receive $400,000 over a one year period. 11.5% tax on the 400K equals $46,000, that leaves $354,000. Now take the 39% federal income tax which equals $138,060. Now the mineral owner is left with $215,940. Now take the 4.86%state taxe out of the $354,000 which equals $16,992 and minus that from the $215,940 and you wind up with $198,948.
    Not sure this is 100% correct, help me out if I am wrong.

    Of course when you go to spend your money then you have to pay sales tax too.
    The oil company also discounts the oil price due to them having to truck or rail the oil to a refinery.

    • Roy_Bean

      And then they want to subsidize housing in the oil patch.

    • sbark

      So then……they know how Phil Mickleson feels huh……..
      but the Left will argue……they got money “left over yet”, they are rich, they better not complain or we will personnally attack and demonize the mineral owners as a group…….even have the newspapers print out the names and address to the Occupiers can find you.

  • WOOF

    What’s the argument against “the measure could cost the people
    of North Dakota more than $595 million in the first five years.”?
    The idea that lowering tax for oil companies is gonna line N.Dakotans
    pockets is preposterous voodoo trickle down nonsense.

    Lower the sales tax, not the oil tax.
    Everybody gets a break.
    ND should look at oil as a limited state resource.
    The people should get their share of the resource.

  • BismarckBigfoot

    I almost forgot to add the new Obamacare Tax on Royalty income will go into effect this year which is 3.8 % on gross royalty income.

  • sbark

    I caught an article on how the industry has found the technique on drilling on the Montanta side of the Bakken, which for years wasnt as productive as the N.Dak side, and they expect alot of rigs to be moving west due to that technology………N.Dak taxes might just help the industry make that decsision a little quicker

    From OGIB report……. North Dakota produced those gushing Bakken wells because the primary reservoir layer, the Middle Bakken, is thickest within its portion of the Bakken.

    In Montana the middle layer is thinner, pinched by the Upper and Lower Bakken layers, and geologists thought a thin Middle Bakken would translate into poor recoveries and flow rates.

    But recently, several explorers have had success with wells that targeted the Upper Bakken. The wells don’t have the big initial flow rates as in North Dakota, but they declined more slowly and had a better oil-to-gas ratios (98% oil) than normal, Middle Bakken wells. The result is making geologists rethink the potential of the Upper Bakken – and therefore the potential of the entire Montana Bakken.

    A productive Upper Bakken is particularly significant in Elm Coulee, the best-producing part of the Montana Bakken to date. In this area the Middle Bakken becomes very thin, pinched out by a broad Upper Bakken. The result is a world-class source rock – remember that the organic-rich Upper Bakken is the source rock for the formation’s oil – with no nearby reservoir. That means all the oil has remained in place

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