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A severance tax quiz Saturday, Mar 29, 2008 By David Sanders With lawmakers converging on the state Capitol this week to raise the severance tax on natural gas, it is obvious that many suffer from incorrect understanding of what higher taxes would do to this volatile and emerging sector of the economy. This deficiency in knowledge stems from a skewed mindset related to our economy, and the government, which is apparently a bipartisan problem. Pop quizzes are used to test one's knowledge (or lack thereof) on a particular topic. Take the five-question quiz to see where you stand. 1) Raising the severance tax on natural gas: A. Will take away Arkansas' competitive economic advantage, which to date has incentivized many companies, both small and large, to invest hundreds of millions of dollars in extraction of natural gas, and as the analysts have pointed out, will cost the state billions of dollars in future economic activity and thousands of jobs. B. Will provide the state with more revenue, which it desperately needs because we can't possibly have too much money coming into the state treasury. 2) Currently the natural gas industry is: A. Providing many Arkansans high paying jobs (nearly 10,000) and the state with new revenue from income taxes (something Texas doesn't do), ad valorem taxes on minerals (a tax Oklahoma doesn't collect), and residential sales taxes (a tax neither of the aforementioned states collect). B. Raping and pillaging the land, and as some in the governor's office have said, not giving the state anything in terms of tax dollars. 3) The $8 per million British Thermal Units price of natural gas Gov. Beebe has used to estimate future revenue from the severance tax: A. Is unrealistic because, as was pointed out by a study compiled by Bentek Energy, a Golden, Colo.-based research and consulting firm, there will soon be a oversupply of natural gas due to the new development of production assets in the southern United States, which will lead to LOWER prices for natural gas. B. Is OK because if Gov. Beebe or his chief of staff Morril Harriman (whom everyone knows is real the brains of the operation) said it, then it must be true. 4) When the AP reported Wednesday that "Beebe said he hasn't ruled out using money from a proposed hike on the severance tax on natural gas to repay bonds for road repairs" and that he said "a concern bond lawyers may have is the stability of the severance tax revenue, which relies on the market price of the natural gas extracted." A. The governor, if he plans a bond program for state highways, will either have to pledge the full faith and credit of the people of Arkansas, which means if revenues from the severance tax don't pan out like Harriman has estimated, then general revenue will have to be used to pay the debt service, or a new revenue stream, by way of a future tax increase, will have to be passed to pay off any future bonds. B. The governor isn't being clear about what that means, but who cares? 5) Lawmakers who vote for the severance tax increase are: A. Being duped, but are OK with being duped because they have the cover of a few players in the natural gas industry who agreed to Gov. Beebe's proposal out of (misplaced) fear that if they didn't agree to his 5 percent with some exemptions, then they would be strapped with a 7 percent severance tax rate with no exemptions, which would be worse than California's severance tax. B. Courageous. If you answered "A" to all the questions then you are grounded in reality. If you answered "B" on any or all of the questions, then you are either in need of remediation or do not care enough about the issue to understand what's really going on. Or you are a lawmaker who is preparing to vote for the severance tax. ------- David Sanders writes twice weekly for the Arkansas News Bureau in Little Rock and is a host of the Arkansas Education Television Network's "Unconventional Wisdom." His e-mail address is DavidJSanders@aol.com. |
