Democrats Announce Initiated Measure to Implement Even Larger Tax Hike on the Oil Industry

According to this table, obtained from Tax Commissioner Ryan Rauschenberger, the State of North Dakota has collected more than $1 billion in additional revenues from the oil industry thanks to the tax reforms passed by Republicans back in 2015.

Those reforms eliminated a massive tax break triggered by low oil prices and lowered the overall extraction tax rate from 6.5 percent to a flat 5 percent (10 percent when combined with the production tax).

The law went into effect in January of 2016. These numbers run through January 18 of this year (click for a larger view). As you can see, because the oil industry no longer has that low price exemption, they’ve paid a lot more in taxes.

Since the 2015 session the Democrats have been trying to paint this tax reform as though it were little more than a hand out to “big oil.” This is, unequivocally, a lie. You cannot call a change to the tax code that results in the taxed industry paying more than $1 billion in additional taxes a hand out and not be called anything other than a liar.

But the argument from Democrats holds that if we’d eliminated the low price trigger but kept the top rates the same we’d be collecting even more money because it would be an even larger tax hike. And that’s what they want to do with a new initiated measure that would raise the tax back to the 6.5 percent level.

“State Sen. Merrill Piepkorn, a Fargo Democrat involved in the measure effort, said the state would be collecting about $200 million more per year if lawmakers would have eliminated the triggers but maintained the 6.5 percent tax rate,” my colleague John Hageman reports.

I’m not sure we can just assume that the $200 million figure Piepkorn is throwing around is accurate. Are we assuming that another roughly $400 million in taxes on this industry from January 2016 to last month would have no effect on oil activity in our state?

We all know that taxes impact economic activity. Generally, the more you tax something the less you get of it. We would probably have had even more oil activity in North Dakota over the last couple of years had Republicans not eliminated that low-price trigger. The thing is, having a trigger like that in the tax code which can cause wild swings in state revenues based on something as volatile as oil prices was bad public policy.

So Republicans removed it, but softened the blow to the industry by lowering the top rate.

That’s called compromise. I’m not even sure most of the Democrats, if you got them to speak honestly off the record, disagree with the reforms.

Unfortunately, they see this not as a policy question but as a political opportunity.

Because it’s complex but their talking points about it – variations on “tax cuts for big oil” – are not.