COLUMBUS – Ohio’s development of oil and gas extraction from fracking has exploded in recent years, leaving local communities carrying the costs associated with the boom.
The state’s tax rate on oil and gas is less than a half percent, much lower than in other oil and gas states.
Ohio lawmakers are discussing raising the state’s severance tax, and charged the 2020 Tax Policy Study Commission with examining reforms.
But the state director of the advocacy group One Ohio Now says the commission’s new report delays action on raising the tax.
“There’s really nothing new, which is the very disappointing thing,” explains Gavin Devore Leonard. “We’ve been looking at this for so long. It says in the report what we know, which is that the rates are too low, that there’s nowhere lower in the country, and we just feel that it’s time to act on this instead of keep talking about it.”
The report notes that market forces are financially burdening the industry, and opponents argue a higher severance tax would discourage new production.
Gov. John Kasich supports a higher tax, and several Ohio organizations are pushing for 5 percent to better compensate for increased infrastructure needs, better regulatory oversight and the negative environmental impacts.
A 5 percent severance tax would match West Virginia’s tax rate on oil and gas production.
Wendy Patton, senior project director for the think tank Policy Matters Ohio, says it would help further efforts to develop a strong shale region.
“We really like the recent agreement of Ohio, West Virginia and Pennsylvania to cooperate on shale development in terms of marketing, workforce development, infrastructure and research,” she states. “There should be a similar tax rate across our three states so we aren’t competing with each other. “
Meanwhile, Leonard says Kasich’s desire to use a severance tax hike as a tax swap is troubling.
“They’re continuing to say ‘Let’s raise the severance tax,’ which we are supportive of that, but ‘Let’s use it to lower income tax rates,’” he points out. “That is absolutely the wrong approach.
“Income tax cuts benefit the wealthy the most, and that approach is just the wrong way to build a strong economy here in Ohio.”
According to Policy Matters Ohio, nearly $100 million would have been collected in 2014 from a 5 percent severance tax.