View Ohio severance tax cautiously
When Ohio Gov. John Kasich first proposed increasing severance taxes on oil and natural gas, many legislators balked. Drilling has been a godsend in East Ohio, they pointed out. Higher taxes could send gas and oil companies to other states, they worried. Kasich lost the battle.
But as he confirmed in his recent State of the State speech, he is determined to try again. He will ask the General Assembly for a 6.5 percent tax on oil at the wellhead and rates from 4.5-6.5 percent for gas.
Kasich clearly is annoyed by opponents of his proposal. During his speech, he insisted his rates will not drive drillers out of Ohio. “That’s a big fat joke because I’ve talked to (industry representatives) in private,” he maintained.
Even with his proposed change, “our severance tax will still be competitive with our energy-rich states,” the governor added.
Telling his audience most of the profit from oil and gas drilling goes out of state, Kasich noted that small, Ohio drillers will be helped by his proposal to cut income taxes.
Kasich is counting on higher severance taxes to fund his plan for broad tax relief that would help virtually all Ohioans.
But legislators should remain cautious about the proposal, especially because times have changed. Oil and gas prices are depressed. Many energy companies have pulled back dramatically on their drilling plans. If this is the wrong time – for East Ohio – to implement Kasich’s plan, lawmakers should reject it again.
