There’s been a lot of talk this session about gross production tax (GPT) and how it may or may not solve part of our state’s budget crisis.
It might be beneficial to discuss what this actually is –a tax on the production of oil and gas. In Oklahoma, the tax is generally remitted to the Oklahoma tax Commission on a monthly basis by the first purchaser of the product.
There are actually four rates of taxation in Oklahoma.
Prior to 1994, the GPT was 7 percent for all wells in the state, both vertical and lateral. In 1994, the legislature dropped the GPT to 1 percent for newly drilled lateral wells for 48 months; after 48 months; the rate would go back to 7 percent. We still have over 6,000 wells at 1 percent; these will go back to 7 percent next year.
In 2014, the GPT was raised to 2 percent for 36 months going back to 7 percent after the 36 months. I would caution you about making this a partisan issue, the Democrat-controlled legislature dropped the GPT from 7 percent to 1 percent in 1994, and the Republican controlled legislature doubled the GPT from 1 percent to 2 percent in 2014.
A historic look at GPT apportionment brought into the state’s General Revenue Fund shows that oil contributed $236.1 million in fiscal year 2014, $132.5 million in FY15 and $4.4 million in FY16. Gas brought in $97.2 million in FY14, $80.8 million in FY15 and $90.6 million in FY16. An equal amount was sent to schools and counties.
Last night, the House considered a bill that in part would have lessened the number of months new wells would qualify for the 2 percent cap from 36 to 18 months. I voted yes for this measure.
Did I like everything about the bill? Absolutely not. I felt it was the best bill that was presented before me. This bill would have funded the teacher pay raise and kept our core services intact. The bill failed 51-46. At one point, there were 57 votes in favor of the bill.
I was one of the 51 who stayed green, and I’ll stand by my decision. In the last 48 hours, I’ve been called a RINO (Republican in Name Only) by special interest groups and Republicans for supporting a revenue-raising measure and a radical conservative by Democrats for not being progressive enough.
I’ve got thick skin, and I’m good with whatever heat comes with this position. There are stressors with this job, but no one is shooting at me (at least not with bullets).
On a positive note, by having 51 votes on the board, this now allows the measures in the bill to go before a vote on the ballot in the next general election.
The bottom line is that nobody wants to pay more in taxes, but nobody wants to go without core state services such as public schools, rural hospitals, roads and bridges, mental health services, Highway Patrol troopers, prisons for violent criminals, etc.
I have always supported increasing the GPT on lateral wells and have been vocal about it, to the point that the Oklahoma Oil and Gas Association (OKOGA) ran ads against me recently.
A number of other lawmakers also support raising the GPT from this 2 percent cap to help the state through this budget crisis. The point remains, though, that to increase a tax in this state requires a 75 percent majority in both the House and Senate. That equals 76 votes in the House.
This goes back to State Question 640 passed by a vote of the people in 1992, which set into place the three-fourths majority required to increase any tax. As I’ve talked about in previous columns, since 1992, not one tax increase has passed the legislature in Oklahoma.
I get a lot of emails and calls asking me to support revenue raising measures, but in reality, Oklahomans don’t like to raise taxes. The last two tax measures that been placed on the ballot for the people's vote have failed.
In 2005 State Question 723 failed by 88 percent, this was fuel tax that would have gone to roads and bridges. In 2016 State Question 779 failed by 60 percent, this would have generated an estimated 615 million a year for education. Just two months ago, a bond failed in Grove for the purchase of school busses.
As always, it is an honor for me to be your state representative and I am working hard every day for the people of District 5 and the state of Oklahoma. I look forward to hearing back from you and appreciate your responses.
Rep. Josh West, (R-Grove), serves District 5 in the Oklahoma House of Representatives. For more information, persons interested may contact him at firstname.lastname@example.org or 405-557-7415.