I'm not sure what's up with Gov. John Kasich, but he wants to increase taxes on one segment of our state in order to provide a tax cut to other segments.
In case you're not clear, this is exactly the same line of reasoning Pres. Barack Obama has when he says he wants to 'tax the rich' to provide funds for various government give-aways.
Kasich believes that an increase in taxes paid by oil and gas drillers in the state would be enough income to cover a reduction in taxes paid by individuals. Many individuals, not versed in Economics 101, hear 'tax cut' for themselves and are ready to jump all over the provision.
But if oil and gas drillers are taxed more, they'll just add the extra taxes to the cost of their product, driving up what individuals will pay. Which means that tax cut we'd get will go right back out to pay for the increased costs of the gas and oil products.
Not smart ... but appealing to people who don't think.
Jason Hart at MediaTrackers.org recently interviewed Jerry James, president of Marietta-based Artex Oil Company, about the proposal. As Hart writes, "While it may go without saying that James opposes higher taxes on oil and gas drilling, the perspective of Ohio employers should not be discounted simply because they have a financial interest at stake."
You can view the interview here.
Hart writes (emphasis added):
According to James — who currently serves as president of the Ohio Oil and Gas Association — leaving the severance tax unchanged would not only benefit Ohio landowners, energy companies, and blue-collar workers, but would drive overall economic growth in eastern Ohio. James predicts this would result in greater tax revenues under the more competitive current rate.
As a supplement to his comments in the above interview, James provided a chart showing a 50% drop in drilling activity in Arkansas after that state passed a comparable tax increase early in a similar energy boom. The Arkansas example was also cited by industry spokesman Terry Fleming of the Ohio Petroleum Council when Kasich’s proposal was first being discussed this spring.
James noted that in addition to the severance tax, energy companies in Ohio pay income tax, sales tax, an “ad valorem” tax on the value of underground minerals, and the state commercial activity tax (CAT). He disputed drilling cost and output estimates from the governor’s office, pointing to the oil & gas industry’s narrow profit margins.
Kasich’s proposal, which remains delayed in the General Assembly, has been endorsed by the Cincinnati Chamber of Commerce and the Columbus Chamber of Commerce on the premise that increased energy production from the Utica Shale in eastern Ohio should be leveraged for lower taxes statewide.
The combined severance tax hike/income tax rebate plan is opposed by the National Taxpayers Union, although it has been deemed compliant with the Americans for Tax Reform pledge.
The last thing Ohio needs is to duplicate Pres. Obama's mantra and politics of division by raising taxes on one industry in order to provide tax relief to others.
It's robbing Peter to pay Paul, which certainly makes it popular with Paul.
But it's bad policy and will hurt all of us in the long run.