Benefit of plan to hike Ohio drillers tax disputed

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COLUMBUS, Ohio (AP) — The administration of Republican
Ohio Gov. John Kasich is differing with legislative budget analysts on
how much a proposed tax increase on big oil-and-gas drillers will
generate, as the two sides move toward a compromise this week.
The
figure is pivotal as Kasich promotes a midterm budget package ahead of
fall elections. He wants the plan to deliver the combination of cuts and
revenue increases needed to push Ohio’s income-tax rate below 5
percent, an accomplishment he would certainly tout on the campaign
trail.
But fiscal experts disagree significantly on how much would
be raised by increasing the severance tax rate on large-volume drillers
to 2.75 percent.
Ohio’s budget office places the amount to be
raised over three years starting July 1 at $874 million. The Legislative
Service Commission has projected an upper limit of $231 million for the
same period on a lower rate of 2.25 percent being studied in the House.
State
Rep. Matt Huffman, a Lima Republican who is sponsoring the House’s
severance tax legislation, said lawmakers are trying to sort out the
competing figures from the administration and the industry.
"It’s
sort of counterintuitive that (the industry) would underplay how much
production there could be, because the likelihood would be we’d just
want to raise the rate," Huffman said. At the same time, he said the
administration may be using estimates aimed at paying for the proposed
Kasich’s proposed income-tax cut.
"I’m just a simple country lawyer," Huffman said. "What we rely on is the research of the
economists at (the commission)."
He
said he anticipates a compromise bill will be ready as soon as Tuesday,
containing elements of Kasich’s plan and the industry-supported
severance-tax proposal that already had been moving through the House.
Huffman
said the final bill can’t contain an overall tax increase if Republican
lawmakers can be expected to support it — so the House is working to
balance transfers to Ohio’s oil-and-gas regulatory program and to local
communities to that end.
Huffman’s bill proposed returning 10 percent to affected communities, while Kasich has proposed 20
percent.
Two
key factors are at play in estimating severance tax revenues: volume
and price. That is, how much oil, natural gas and natural gas will be
produced, and how much it will be worth.
Legislative economists
said, because Ohio’s oil and gas industry is growing so rapidly and
because the impact on production of raising the tax is unknown, "a great
deal of uncertainty exists regarding the revenue from the tax."
They
choose simply to project forward using current prices for oil, natural
gas and natural gas liquids to come up with their estimates. A "low
scenario" on the 2.25-percent proposal before the House Ways & Means
Committee puts revenue from the tax at $111 million from 2015 to 2017,
with $231 million being the "high scenario."
The administration has not divulged its assumptions in coming up with the higher $874 million.
"We’re comfortable with our numbers," said Jim Lynch, a spokesman for the budget office.
Wendy
Patton, a senior project director at the liberal think tank Policy
Matters Ohio, said it’s difficult for an outside group to come up with
estimates independent of both the administration and the industry
without knowing what production and price information was used.
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