Short-Sighted Democrats Treat Oil Tax Cuts Like Some Sort Of A Third Rail

Democrat Senate Minority Leader Mac Schneider isn’t on the ballot this year because he represents an even-numbered district. Thus, he’s free to play bomb-thrower for his party this cycle, and the bombs he’s been throwing have to do with efforts to reform the state’s taxes on oil production last session.

To hear Schneider tell it, you’d think that even discussing a reduction in the state’s oil production and extraction taxes was something akin to endorsing child pornography.

Schneider’s arguments are problematic. For one thing, Schneider claims that the oil tax reforms considered in the legislature “would have cost our state $1.3 billion in the first five years alone.” Settingasside  the fact that we shouldn’t be talking about tax cuts as a “cost,” as though the money belongs to the government and not the taxpayers, there’s the fact that the $1.3 billion figure Schneider tosses around was demonstrated to be false during the session last year. It’s based on exaggerated numbers cooked up by Demcorats to manufacture a number to scare voters with (they actually cited a much lower figure initially before deciding they needed to inflate it for rhetorical purposes).

But really, Schenider’s entire premise is bogus, and not just because the actual outcome of the 2013 legislative session was a tax hike on the oil industry.

Oil production has swiftly become one of North Dakota’s most important industries in recent years. In calendar year 2013, oil and gas tax revenues accounted for over 50 percent of all the state’s revenue collections. Everything from the state’s recent, and rapid, population growth to booming per-capita incomes are attributable to the oil and gas development going on in the state.

Given the importance of this industry to our state’s well being, doesn’t it make sense to at least have a debate about the tax policy surrounding it? We might not all agree on what the outcome of that debate should be, but Democrats seem to think it’s toxic to even discuss the idea.

I know reducing taxes for the oil industry doesn’t make for popular politics – because “tax cuts for big oil” or something – but it’s worth noting that North Dakota’s combined 11.5 percent tax on oil production and extraction is both very high compared to other states, and unpredictable.

The tax has built into it a “trigger” which has the oil industry paying a lower rate if prices fall below $50 per barrel. During the 2011 session the oil industry called for an elimination of the “trigger” for a lower rate in exchange for a flat 9 percent rate regardless of prices.

That would be a reduction of 2.5 percent from the current maximum rate, but it would also be a total elimination of the lower rate.

This seemed like common sense reform, and indeed it had bi-partisan support in 2011 with Dickinson Democrat Shirley Meyer sponsoring the bill.

But the state’s Democrats leadership seems intent on demagoguing this issue. During the 2013 session Senator Schneider called the push to simplify and lower the state’s oil taxes “radical” and “reckless.”

Maybe that explains why Schneider is the Minority Leader in the Senate, instead of the Majority Leader. Mau-mauing reforms to the oil tax may make for good partisan politics, but it’s hardly exemplary of sound leadership on policy. And certainly this is the sort of thing that has led to the marginalization of Democrats in state government, as evidenced by their utter lack of serious legislative candidates west of Bismarck.