Tax breaks on oil and gas production will cost Oklahoma nearly $400 million this year and next.
Gross production tax collections this year are projected to be $638 million. That's $397.5 million less than what they would be if the rate were the standard 7 percent rather than at incentive rates for the first years of production. The state will also pay out $2 million in tax credits and adjustments.
Next year, gross production tax revenue is projected to be $333.5 million less under incentive rates than they would be at 7 percent. The state will also pay out $39 million in rebates, credits and adjustments.
"There's no good policy reason why we continue to subsidize oil and gas production to the tune of hundreds of millions of dollars a year when our schools continue to struggle, when our mental health providers are struggling to stay open, when we have thousands of people on waiting lists for those with developmental disabilities," said Oklahoma Policy Institute Executive Director David Blatt.
Blatt said the state’s effective tax rate will hit 4.8 percent next year. That’s up from 3.2 percent in 2016, but still significantly behind fellow oil states Texas and North Dakota.
A proposal to add a 5 percent tax to wells during their incentive period could spur lawmakers to reduce those oil and gas tax breaks.
"This newly filed initiative petition is definitely sending a signal to legislators to get it done and get it done quickly," Blatt said. "Otherwise, the voters will make that decision in November."
Revenue from the proposed 5 percent tax would go toward $4,000 teacher pay raises.
