Massive Log Rolled Tax Bill Defeated at the Capitol
HB 1035 failed spectacularly at the Capitol this week, earning 55 yes votes to 44 no votes, far short of the votes required to meet the 75% margin required to pass a tax increase at the legislature. It did meet the minimum requirement to go on as a state question in 2018 however by then either other taxes will be raised or hopefully massive spending cuts will occur to trim down the budget deficit.
Out of that debate and vote came a wonderful photo from the Oklahoman, pictured above. Several websites re-posted the picture and produced entertaining comments from readers focusing on the facial expressions on the Republicans in the photo.
There is a wonderful snippet from the debate this week showing Rep. John Bennett arguing against the bill. Bennett, like Gary Richardson, advocates for doing a performance audit on all the state agencies before passing a dime of tax increases. Regular audits are like balancing the checkbook; performance audits dig into where the money is being spent, the inefficiencies and wasteful parts of the processes being delivered. The State Auditor is supposed to be auditing things but there are some agencies set up outside his jurisdiction. As an example the State Auditor can audit the AG office but not the Department of Human Services.
Some will whine that the State Auditor doesn't have the budget, knowing but not saying that the agencies PAY for these audits out of their own budget, part of the overhead of running a state agency. Gary Jones might whine that he doesn't have the time or the staff but he has plenty of both and can efficiently prioritize audits.
A performance audit might well show that some agencies need increased funding if they are spending the budget wisely and efficiently but others are terrified of an independent audit and will do anything to attempt to stop legislative oversight of their domain.
And is HB 1035 a log rolled bill? Recent rulings by the State Supreme Court have muddied the waters on what is and what isn't a log rolled bill. This bill seems to be an obvious log rolling bill as there are fuel taxes, beer taxes, cigarette taxes, little cigars, chewing tobacco, gas taxes and spending measures all rolled up into one bill. T he only thing they have in common is that they raise taxes and funnel it into the state General Fund and other agencies. Not sure if that meets the requirement for log rolling but it seems to do that.
Here are the rascals that voted for the largest tax hike in Oklahoma history:
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EXCUSED: 2
Dunlap and Inman (he was getting the crap beat out of him in a hallway somewhere)
House and Senate Leadership already have another bill filed, one that increases the Gross Production Tax (GPT), something that the oil industry aren't going to allow to happen. To do so will cut off their campaign funds from the directional drilling industry, meanwhile the less profitable and heavily taxed vertical well drillers and producers are supporting the return of the 7% severance tax or GPT for all oil and gas producers. The directional drilling folks are paying 2% for the first years of well life while they pump out the majority of oil and gas and the vertical drillers and producers are paying the entire 7% GPT. At the end of the three year special tax rate the production of the well has dropped by 87% according to one study. A well that was pumping 287 barrels per day at 2% tax rate might now be producing 37 barrels per day at the 7% GPT rate.
Lets run the numbers at $50.00 per barrel. 287 x $50.00 is $14,350.00 of oil taxed at 2% is $287.00 per day. The same well three years later is producing 37 barrels per day at $50.00 or $1850.00 taxed at 7% or $129.50 per day.
Vertical wells producing 287 barrels per day would pay $1004.50 per day instead of the $287.00 per day, saving the oil company $261,887.50 in the first year. A rough estimate is a horizontal well costs a half million dollars in lost GPT taxes in the first three years.
Meanwhile State Lt. Governor Todd Lamb has lived up to his moniker as the "silence of the lamb" as he has not spoken out against the tax increases nor has he indicated any willingness to step up into his constitutionally mandated leadership of the Senate to block any of the spending increases or the massive tax increases.
