A new study released by the accounting firm Ernst & Young says that even if Ohio Gov. John Kasich gets his way and boosts the severance tax in the state on oil and gas drilling, Ohio’s severance tax rate would still be less than other states. Kasich wants to rob Peter to pay Paul, taking even more money from energy companies and landowners in the form of higher severance taxes in order to reduce the state income tax for everyone.
Apparently the Ohio Business Roundtable is in Kasich’s hip pocket because they are the ones who commissioned the study. This is the first time MDN has ever heard of a “business group” who wanted higher taxes.
The study released yesterday, requested by the Ohio Business Roundtable, shows that the state’s current overall effective tax rate (measured as total taxes divided by sales) is 80 percent below the average for the other top seven states for a well producing dry natural gas and natural gas liquids. For a well producing dry natural gas and oil, Ohio’s effective tax rate is 65 percent below the average, the study said.
Even with the increase pushed by the governor, Ohio’s effective severance tax rate would still be 16 percent lower than the other states’ average for the well producing dry natural gas and natural gas liquids. It would be 40 percent lower for the well producing dry natural gas and oil.
Including all major state and local taxes for both types of wells, Ohio’s overall effective tax rate would be 40 percent or 48 percent lower than the other states’.*
Unfortunately an extended search did not turn up a copy of the study itself. MDN is almost certain that of the states compared in the study, Pennsylvania was not among them because PA does not have a severance tax! And if Ohio doesn’t want to have drillers stay on the PA side of the wet gas line, they would do well to compare apples with apples. Fortunately the Republicans who control the Ohio legislature are not buying Kasich’s tax increase plan.
*Columbus (OH) Dispatch (May 16, 2012) – Study: Ohio rates lag even with ‘fracking tax’