Archive for Saturday, July 7, 2012

Governor’s tax cut plan includes increase

July 7, 2012


— While much has been written and said about the tax cuts signed into law by Gov. Sam Brownback, not much has been mentioned about a tax increase that is part of that legislation.

“Step one, what actually takes place on our proposal and what we put in, is actually a tax increase, and it’s a severance tax increase,” Brownback said recently.

The measure repealed the state’s 24-month severance tax exemption for gas wells and oil wells that produce more than 50 barrels of oil per day. Only production after June 30 is affected.

This is expected to generate additional severance tax revenue of $18 million in the current fiscal year and $45 million in the next, according to the Kansas Department of Revenue.

Despite the tax increase, there was little pushback from industry interests, who have not been shy in the past about lobbying against tax increases.

“We did support the governor’s tax bill, which had the severance tax provisions in it,” said Kent Eckles, a lobbyist with the Kansas Chamber of Commerce. “However, when we have an industry specific issue, we stay out of it, especially when we have members on both sides of the issue. In this case, we had big oil members opposed to those provisions while the smaller, independent producers were fine with the severance tax provisions.”

The Kansas Independent Oil and Gas Association maintained a neutral position, said the group’s president, Ed Cross.

Of the 2,200 oil and gas operators in the state, Cross said perhaps 50 would be affected by the changes.

“It did impact some, but for most of the small producers, it will not impact them,” he said.

Cross said he doesn’t expect the severance tax issue to slow growth in the industry in Kansas.

Kansas has seen an increase in oil production for five of the past six years.

“It’s a robust industry in the state of Kansas,” Cross said.

And Kansas officials are drooling over the potential economic impact of fracking and horizontal drilling in southern and western Kansas to revive an area that was tapped out by vertical drilling years ago.

“The potential economic benefits to Kansas could be significant, resulting in hundreds of wells drilled, billions of dollars in investment, thousands of jobs and industry activity in the Mississippian Lime Play for the next 20 to 30 years,” according to the Kansas Department of Commerce.

Opposition to the severance tax increase was probably muted by other provisions of the bill that will benefit businesses. The measure also eliminates state income taxes on nonwage income for the owners of partnerships, S corporations and limited liability companies.

Brownback has said that change will stimulate the economy like an adrenaline shot to the heart. Critics have said it is a tax giveaway that will deal a significant blow to state efforts to fund education and social services.

In addition, the new law will cut the individual income tax rates of 6.45 percent, 6.25 percent and 3.5 percent to just two rates at 4.9 percent and 3 percent.

Legislative research staff have said the total tax cuts will remove $4.5 billion from the state treasury over six years from a state budget that currently stands at approximately $6.6 billion per year.

House Democratic Leader Paul Davis of Lawrence has been a vocal critic of the tax cuts signed into law by Brownback. He said the severance tax increase is also off base.

“There are numerous oil and natural gas companies wanting to pursue increased exploration and drilling in Kansas. This is great news for the nearly 100,000 Kansans that are looking for jobs,” Davis said. “Unfortunately, the governor doesn’t seem to see it that way. He seems intent on creating more reasons for these companies to look to other states for business opportunities, and that just doesn’t make any sense to me.”


chootspa 5 years, 7 months ago

"And Kansas officials are drooling over the potential economic impact of fracking and horizontal drilling in southern and western Kansas to revive an area that was tapped out by vertical drilling years ago."

Buh bye, Ogallala Aquifer. We need the tax revenue more than we need the environment or the drinking water, apparently.

rtwngr 5 years, 7 months ago

Sure, chootspa, look at what all of the vertical drilling has done to the aquifer. Nothing.

just_another_bozo_on_this_bus 5 years, 7 months ago

Can you provide proof that it has done nothing?

And FYI, these are two very different techniques, and fracking and horizontal drilling require the use of lots of very toxic chemicals that result in the contamination of millions, and perhaps even billions, of gallons of water.

But in your world, if somebody is making money off of it, such inconvenient realities only need to be swept under the rug (or flushed down the nearest aquifer.)

chootspa 5 years, 7 months ago

Non sequitur. Fracking is not the same as vertical drilling.

oldexbeat 5 years, 7 months ago

Outside interests will take the oil out, take the money out, leave the polluted water, or no water at all. Done. Great for Kansas, right ! (If you own a well and don't drink water...) Thank, Gov. Sam Brownback -- Brownbackistan -- a dry crusty state.

rtwngr 5 years, 7 months ago

You're just making all of that up so you can justify your obtuse stance against a governor that is willing to make some hard choices and fix what the libs have done to this state. It's time to come down off of your high and get real.

weeslicket 5 years, 7 months ago

from rtwngr: ".... and fix what the libs have done to this state."

what an absolutely bizarre worldview. you may not like the condition of this state, but please lay the responsibility at the feet of the (conservative, uber-conservative) republicans who have controlled this state for decades.

Crazy_Larry 5 years, 7 months ago

You seem to think that the executive branch of government calls all the shots. You are sorely mistaken, my friend. It's the legislative branch that makes the laws, budgets, etcetera. And the legislative branch of government in Kansas has been dominated by republicans for decades. Glad I could help the ignorant.

JayhawkFan1985 5 years, 7 months ago

The right wing is now accusing others of making stuff up??? Un frigging believable.

chootspa 5 years, 7 months ago

And for the record, I'm in favor of this tax kicking in immediately instead of after two years, which is my understanding of how it used to work. I'm not in favor of it being used as an excuse for environmentally damaging methods of natural resource extraction.

yourworstnightmare 5 years, 7 months ago

This seems to be part of a larger plan to expand drilling and fracking, which is why the oil and gas industry are silent on it.

Go ahead and exploit the land of Kansas. You will pay a nominal penalty to do so. Or is it a tax?

Jeff Barclay 5 years, 7 months ago

Any chance we could ever get an even-handed news report? It seems our news is either elephants or donkeys. Personally, I think Scott might be a Democrat. Just saying-

Carol Bowen 5 years, 7 months ago

What happened to journalism? Did no one get access to the bill, read it, and report on it?

riverdrifter 5 years, 7 months ago

Follow the money: who manufactures frack fluids?

Crazy_Larry 5 years, 7 months ago

Play with fire and you will get burned, Sir Blowsalot.

680,000 wells hold waste across US -- with unknown risks. "Over the past several decades, U.S. industries have injected more than 30 trillion gallons of toxic liquid deep into the earth, using broad expanses of the nation's geology as an invisible dumping ground. No company would be allowed to pour such dangerous chemicals into the rivers or onto the soil. But until recently, scientists and environmental officials have assumed that deep layers of rock beneath the earth would safely entomb the waste for millenia.

There are growing signs they were mistaken.

Records from disparate corners of the United States show that wells drilled to bury this waste deep beneath the ground have repeatedly leaked, sending dangerous chemicals and waste gurgling to the surface or, on occasion, seeping into shallow aquifers that store a significant portion of the nation's drinking water."

Crazy_Larry 5 years, 7 months ago

This is a great tax plan! (sarcasm off)

USGS: Recent Earthquakes 'Almost Certainly Manmade'; Report Implicates Oil and Natural Gas Drilling. "A U.S. Geological Survey research team has linked oil and natural gas drilling operations to a series of recent earthquakes from Alabama to the Northern Rockies.

According to the study led by USGS geophysicist William Ellsworth, the spike in earthquakes since 2001 near oil and gas extraction operations is “almost certainly man-made.” The research team cites underground injection of drilling wastewater as a possible cause."

cato_the_elder 5 years, 7 months ago

The unemployment rate has dropped in every state that elected a Republican governor in 2010, as the result of which the growth of the job market in those states is, on average, improving 50% faster than the national rate:

chootspa 5 years, 7 months ago

And therefore it's ok to frack. Um, what?

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