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Odd name, odd debate Thursday, Feb 21, 2008 By John Brummett This severance tax debate is an odd little thing. It's as if eight to a dozen people care. It's as if we're thinking about raising a tax just for the heck of it. I get scant response whenever I write about this issue. I've noticed that my favorite local blog tends not to get many comments when it posts information on this percolating debate. It's goofy all the way around. Take that very word - "severance." It means the act of severing, or separating, as in a state from its natural resources, be they timber or mineral or gas or oil. Strangest of all, so strange that I am fairly certain it would never happen, is this ludicrous notion springing up lately that we might confront two competing initiated acts on the subject on ballot this fall. One would be by Sheffield Nelson to raise the natural gas severance tax to 7 percent of market value, which is the same as what Oklahoma charges. The other would be by Gov. Mike Beebe to raise it to, oh, something less. How peculiar would that be? You'd have our governor, a confirmed pragmatist who loves the insular legislative process but tends to eschew powerful rhetoric in the public arena, going to the people with his first real investment of personal political capital. And it would be with a proposal that ought to carry this motto: "Less bold than Sheffield." So far this issue has been discussed in all contexts except the ones that really apply, which are moral and ideological. Because of this mad rush by out-of-state gas exploration giants along what's known as the Fayetteville Shale through north-central Arkansas, Beebe has declared that we ought to collect taxes on our natural gas generally equivalent to what other states get. We don't get anywhere near that now. We apply an antiquated, industry-permitted rate that is a submicroscopic fraction of a single percent of cubic volume. Other states charge exponentially higher percentages, and on market value, not volume. But there are hang-ups. Our state constitution requires a three-fourths majority legislative vote to raise this strange little levy, and that's a threshold nigh unto unattainable. The industry is opposed to change, of course, and Beebe's style is not to fight the industry, but to try to get the industry to agree to something. Beebe hasn't said how much he wants to raise the tax. He acknowledges that the industry asserts that Arkansas applies other corporate taxes that might mitigate the relative meagerness of our severance tax in comparison with other states. He says he is still waiting on some kind of expert analysis on that. Last I heard, state fiscal officials were saying it was complicated, in part because the gas companies wouldn't fully cooperate. Meantime Sheffield Nelson, the retired gas executive who has long insisted that our gas severance tax should be higher, has moved forward with his initiated act. All the while, leading legislators are saying taxes should never be applied punitively or just for the heck of it, and certainly never in a way that might hamstring out-of-state investment in our people. And they point out that home heating costs are rising already. Why would we want to raise them more? Then there's the odd debate by which Beebe wants to spend the money solely on roads and Nelson wants to spend some on colleges. Not so long ago, Beebe would have agreed with me that we shouldn't dedicate, or earmark, general revenue. He would have agreed with me on this: If you need more money and can see a fair source for raising it, you should make the case to raise that tax, then leave the allocation of the added revenue to the fluctuating needs of the state as determined by the biennial judgment of the state Legislature. But now he wants to take an existing general revenue source and make it solely special revenue for asphalt. This would be the first time we used anything other than strict road-user fees to pay for roads. Odd. Just odd. Meantime Beebe says he could go along with exempting new exploration from the tax for a while, on the theory that the capital investment deserved a break. But he says he could only do that for a relatively high rate later. Or he says he could go with something lower, so long as it applied immediately. So you've got everything in this mix except the compelling moral and ideological argument. You see, it not enough for Beebe to say we should raise our severance tax rate because it's lower than that of other states. If that were sufficient, then states around us without personal income taxes would be obliged to create such taxes on the argument that it's not fair that they don't get as much money out of their citizens' paychecks as Arkansas. In the end, the people must be persuaded morally, conceptually and ideologically. They must be made to understand that our state has precious resources and dire needs, and that it's an outrage for us to sell our precious resources on the cheap and deny ourselves revenue desperately needed to give our kids better schools and our communities better roads. The people must be made to understand that we pay the higher out-of-state taxes in our gas prices already, and that it's people elsewhere - not us - who benefit from our devaluing of ourselves and what's in our own ground. The people must be shown that the pipeline for Fayetteville Shale goes out of state. If properly and responsibly framed, this debate isn't odd at all. It's compelling. It's about how we see and value ourselves. So let's get it started. ------- John Brummett is a columnist for the Arkansas News Bureau in Little Rock. His e-mail address is jbrummett@arkansasnews.com; his telephone number is (501) 374-0699. |
