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May 8, 2013
Another View: Oil tax would hurt state's economy


(May 8 -- By Catherine Reheis-Boyd, Special to The Bee)

Dan Morain got it wrong on the oil severance tax ("Calculating the profits, pitfalls of an oil tax, May 1). Like other Capitol insiders, he is laboring under the notion that an oil severance tax is a free lunch. It's not. It's a huge tax increase on energy production and it will result in a decline in oil production here and an increase in the oil we import from foreign countries. It will result in the loss of thousands of California jobs and put upward pressure on the prices we pay for gasoline and diesel.

Alaska under Sarah Palin fell for the free-lunch myth with disastrous results. After raising the severance tax, Alaska saw oil production plummet. The Alaska Legislature last month voted to slash its severance tax in the hope it would bring back some of the lost energy production and the economic benefits that come with it.

North Dakota, with the nation's fastest growing economy and lowest unemployment rate, is lowering its severance tax because lawmakers there know a good thing when they see it. They understand that tax policies that encourage production result in higher tax revenues for government.

Increasing taxes on domestic energy production also will discourage the necessary investments in the Monterey Shale formation, a huge energy resource that could revitalize the San Joaquin Valley economy, put Californians to work and help balance the state's budget. A recent study by the University of Southern California concluded development of the Monterey Shale could produce up to 2.8 million new jobs and generate $24 billion in new tax revenues for state and local governments. And that's without making any change to the taxes oil companies already pay.

This is an opportunity we can't overlook or dismiss. It would be tragic if politicians reach for the shiny object of the severance tax and thereby consign the communities of the San Joaquin Valley to more poverty, unemployment and economic stagnation.

Oil companies in California pay their fair share and more. We may not have the highest severance tax in the country but make no mistake, California is a high tax state. We have among the highest corporate and personal income taxes and sales taxes in the country. In contrast, neither Texas nor Alaska has any personal income taxes and both have very low corporate taxes.

California taxes oil before it's even produced by assessing oil properties based on the current value of oil in the ground.

Catherine Reheis-Boyd is president of the Western States Petroleum Association.

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