Fractious on fracking

Toledo Blade - May 21, 2012

This editorial from the Toledo Blade cites our work as it questions Gov. John Kasich’s proposal to use a stronger fracking tax to cut income taxes, and the state legislature’s apparent unwillingness to consider a fracking tax.

Ohio seeks to reap the economic benefits of greatly increased oil and natural-gas extraction through the enhanced use of hydraulic fracturing, or fracking, coupled with modern drilling techniques. Before that can occur, Gov. John Kasich and the General Assembly must figure out how to tax the practice fairly and regulate it effectively.

So far, the governor has gotten it about half right. His fellow Republicans in the legislature, not so much.

Mr. Kasich wants to impose a 4 percent severance tax on oil and natural-gas liquids fracked from shale deposits in eastern Ohio, up from the current ludicrously low 20 cents a barrel. GOP legislative leaders, parroting industry lobbyists in Columbus, say the proposed tax would harm Ohio’s economy and deprive the state of 200,000 potential jobs.

The governor has the better argument. If drillers want to exploit the state’s nonrenewable natural resources — and they do — they should pay adequately for the privilege. The tax rate Mr. Kasich seeks is less than the 5 percent tax levied in neighboring Michigan and West Virginia.

The editorial cites our two of our studies related to Kasich’s proposal.

Analyses suggest that the cut would give Ohio’s wealthiest taxpayers thousands of dollars a year. But the middle 20 percent of the state’s households would get an average annual tax cut of just $42.

It would be better to use that revenue to start to restore the deep gouges the state has made in aid to local schools and governments, as well as vital state services. The advocacy group Policy Matters Ohio proposes a 5 percent severance tax, which it says would keep the state competitive with its neighbors while enabling communities to rehire laid-off teachers and police officers.

The Blade goes on to say that a fracking tax has to raise money for regulation of the industry, protect public safety and the environment, and help communities meet costs they face because of the fracking boom. It also notes that the state has inspected very few wells already operating in Ohio.

Governor Kasich and the General Assembly would serve Ohioans best by levying a reasonable tax on fracking, regulating it effectively, and allocating a fair share of its benefits to all taxpayers.

Fractious on fracking
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