"If you let the Democrats bring oil production taxes to a vote of the people, they may win the vote and swing some political races to their side."
I caught up with State Auditor, Gary Jones, tonight. He made the trip to Tulsa to attend the County Committee meeting and visit with Republican leaders in the Tulsa area. At the end of the meeting I had a few minutes with him and talked about the various tax hike initiatives being floated, including his own recommendation to consolidate tax rates for Gross Production Tax.
Mr. Jones is convinced that the Democrat caucus is fully determined to push for a statewide vote on petroleum production tax increases. Jones says that the popular vote will not likely be sympathetic of the oil companies. When you add the 'coat-tail' effect of that initiative, it may make several legislative and statewide offices fall decidedly toward the Democrat camp.
The Democrats want all oil production subjected to the 7% rate which has historically been the rate. Several years ago the Republican leadership decided to deeply cut the initial gross production tax as an incentive to get new wells drilled. With the horizontal drilling technology, drillers got to produce oil at the 1% rate for the first 3 years of a well's life. Then the rate hiked back up to 7% thereafter. Recently the legislature adjusted that discount rate to 2% for the first 3 years on new wells.
Jones may have a very good point on the Democrat maneuvering. It appears that the Republican leadership has 3 options on Gross Production Tax Rates;
- Let the Democrat bill go to a floor vote and perhaps a resolution will pass which calls for voters to settle the matter next year, at the General Election. The initiative is deeply tied to Scott Inman, who is a Democrat candidate for Governor. If the tax wins on election day, perhaps Inman will also win the governor's mansion because of the coat-tail effect of that issue.
- Preempt the Democrats by sending a Republican version to the voters with perhaps a 4% or maybe even 5% gross production tax package. That tax proposal may be even more popular, but It will be endorsed by the Republican Leadership rather than the Democrat leadership.
- Kill any Gross Production Tax hike. Perhaps send a tobacco tax proposal to the people instead? But you risk a class warfare rhetoric for the entirety of the 2018 election cycle.
- I wanted him to look at means-testing the close to $1 billion that the legislature gives to public universities in the state. I suggested replacing that massive annual pot with a state version of the federal PAL grants which award individual students a grant based on their family income. By targeting the lower income students for assistance, we avoid giving most of it to the many affluent Oklahoma families who currently get a 'half price' college education at the expense of poorer families who have to pay sales tax but never go to college.
- I recommended an adjustment in the mandates of the 1991 landmark education bill known as 'HB1017' education overhaul which mandated tiny class sizes and allowed the Oklahoma Teachers' Unions to get a huge windfall of new members by requiring districts to hire massive armies of teachers. If we allow the average class sizes to grow from the current 16.3 students per teacher, and allow an average of 4 more students per class, we can pay teachers a $10K annual raise and still pay less per student on teacher pay than we currently do. Read more of the plan, here. San Diego, CA, for instance, spends about $2500 per student, on teacher pay. Oklahoma pays about $2700 per student on teacher pay. But because their classes are 30% larger, their teachers make a lot more money.