On July 25th, the Tulsa-based think tank Oklahoma Policy Institute (OPI) sent an email that examined some of the latest employment data for Oklahoma, which “showed a loss of 9,900 jobs from June 2015 to June 2016” from the state’s energy sector. Bad news indeed.
But a few hours later, OPI released its “Agenda” for Oklahoma prosperity – which includes a proposal to raise taxes on oil and gas by several hundred percent.
Seriously? Unfortunately, yes.
As OPI argues:
“Lawmakers should restore gross production taxes to the long-established rate of 7 percent…”
OPI spun this pretty well, considering their tax rate proposal would mean raising taxes on Oklahoma oil and gas by a whopping 250 percent. This is especially absurd since Oklahoma already raised taxes on oil and gas by 100 percent just last year.
It’s a pretty basic economic principle that, if you want less of something, you tax it. So it stands to reason that a huge tax hike on oil and gas would mean – you guessed it – less oil and gas!
How do you go from regretting massive job loss to proposing higher taxes – and how in the world can you call that a “prosperity” agenda?
Here’s one explanation: OPI doesn’t believe taxes have any impact on economic activity. The only result of higher taxes is more government revenue, or so OPI appears to think.
Want proof? Well, we’ve got it.
OPI argues that with a higher tax rate, Oklahoma would receive millions of dollars more in gross production taxes. As the group declared just a few months ago:
“Last year (FY2015), the state lost $473.0 million in revenue from taxing horizontal production at 1 percent and deep wells at 4 percent rather than the standard rate of 7 percent, based on OTC data.”
It seems the good folks at OPI might have slept through their economics courses, or at least the introductory one. That $473 million in “lost” revenue is a false figure, because it assumes production levels would have stayed the same even with a 600 percent higher tax rate.
What evidence does OPI give for assuming that production would be identical regardless of the tax rate? Seriously, is there any real world, practical example of that ever happening?
We didn’t’ find one in OPI’s “Prosperity Agenda.” Let us know if you do, though!