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.