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Fallacies in the conservative case against Kasich’s shale plan

As you have seen on our very own pages, there is a difference of opinion among Ohio’s conservatives regarding Governor Kasich’s severance tax proposal. Below, we take issue with some of the main arguments against the proposal.

The current severance tax will already result in $433 million for the state to use to cut income taxes.

This is a claim made by the Ohio Liberty Coalition in their press release.

“What Governor Kasich is proposing is unnecessary and unwise. Under the current rules, the severance tax on oil and gas produced $11 million in state taxes in 2009, and by 2014 it is projected by the Ohio Chamber of Commerce to increase to $433 million per year. If the Governor wants to cut personal income taxes he can use that new money to do so. It is unnecessary to raise taxes when this industry is already on track to dramatically increase tax revenue. It is also unwise to throw roadblocks in front of an industry that is critical to the economic future of our state. Some companies are already leaving Ohio. That is not what we want.”

Wrong, wrong, wrong.

Before I address this one, I want to stress that we agree with the OLC on many many issues, and have much respect for the grassroots work that they do. However, they got this one just plain wrong. Here is the report that Tom Zanistowski is getting his information from.

He states that under current law, the current severance tax will collect $433 million per year by 2014. That isn’t so. Check the table on page 65, which shows projections of income based on current law. The $433 million figure is an estimate of all state AND local taxes. The projection for the current severance tax, in the same table, is only $16 million in 2014, not $433 million.

In one fell swoop, the OLC’s first and primary argument is proven false. It’s an honest mistake, (one they have yet to correct, I might add.) However, if they misread this simple piece of data, my trust in their understanding of the issue is broken. Thus, their entire argument against the proposal lacks credibility.

This policy is not conservative. If you support it, you’re a RINO.


The governor’s proposal uses 100% of the funds from increased severance taxes to cut income taxes for every Ohio taxpayer. Since when is reducing income taxes and letting taxpayers keep more of their own money a RINO concept?

Would the same tea party supporters call Sarah Palin a RINO? If they don’t want to be hyprocrites, they would. Because while governor of Alaska in 2007, Sarah Palin significantly raised taxes on oil production.

Palin, 44, proposed the tax increase Sept. 4, 2007, and called a special legislative session to pass it. At an Oct. 12 community meeting in Anchorage, the governor referred to oil as “our very valuable non-renewable resource.”

“When we develop our natural resources, we will do so for the maximum benefit of Alaskans,” she said then. Palin signed the tax increase Dec. 19.

This was a very large tax increase, resulting in billions of dollars in additional annual taxes on oil production. In addition, some of that money went to fund more government spending. Many die-hard Sarah Palin supporters have describe this as “standing up to the oil companies.” Are those same supporters now calling John Kasich a RINO for proposing a small fraction of that increase where not one dime of that money is used for more government spending? It would appear so.

How about Rick Perry in the state of Texas? Nothing says “conservative” like Texas, right? The total tax burden on gas and oil production in Governor Kasich’s proposal would still be much lower than that of Texas, according to a study performed by independent auditor Ernst & Young. In Texas, the total effective tax rate is 8.2% to 8.9%, depending on what is being produced. Under the Kasich plan, the total effective tax rate would be 5.5%, still lower than Rick Perry’s Texas.

States with governors regarded as “staunch conservatives” like Perry and Palin have implemented much higher taxes on oil and gas production than what Kasich proposes. The “not conservative” charge holds no water.

This is a redistribution of wealth!

No it isn’t.

This is not a policy that takes from the wealth of oil companies to redistribute to other people through government spending.

First off, it’s not taking anything that belongs to the oil companies. The wealth is in Ohio’s ground. This plan would take that wealth in the ground and use it to reduce taxes for Ohioans.

Second, I return to the Sarah Palin example. She is the undisputed hero of the Tea Party. Even though Alaska already had a budget surplus, Palin increased taxes on oil companies.

The state received $5.1 billion from oil companies in fiscal 2007, when it had a $1.2 billion surplus.

Each Alaska resident gets an annual rebate from state oil revenue, and this year Palin added $1,200 more to the $2,100 check each person received.

Well, by the same argument, isn’t what Governor Palin did a “redistribution of wealth?” The same folks that hold Sarah Palin in the highest regard as an example of flawless conservatism, are criticizing Kasich for a policy that is similar, yet much less aggressive than hers. When was the last time you heard a Tea Partier call Sarah Palin a RINO?

Folks, Alaska and Texas are both states that have no income tax. Part of the reason for that is that they have a reasonable energy tax policy that allows their citizens to benefit from the resources they were blessed with beneath their feet. If you want to realize the long term goal of becoming a state like Texas that has no income tax and has an economy that is the envy of every other state, start by looking at what Texas does.

This plan strikes the right balance between being fair to the industry and being a benefit to the state’s citizens. And since not a single dollar of the tax revenue would fund more state spending, but rather reduce the income tax in Ohio, thereby making Ohio more competitive, there isn’t a serious reason that conservatives should oppose it.

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Third Base Politics is an Ohio-centric conservative blog that has been featured at Hot Air, National Review, Washington Post, Los Angeles Times, Pittsburgh Tribune-Review, and others.


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