EDITORIALS : Right On
Posted on Thursday, November 15, 2007
URL: http://www.nwanews.com/bcdr/Editorial/55713/
In regard to the severance tax on natural gas, state government made $ 619, 417 during the last fiscal year at the current rate — three-tenths of 1 cent per thousand cubic feet. It’s a sum that in no way compares to what Arkansas ought to be making.
According to the findings of the Legislature’s Joint Committee on Economic and Tax Policy, state government would have made tens of millions more if it simply charged the same rate states like Louisiana, Mississippi and Oklahoma already do. It’s also true that this state’s tax rate on natural gas has been unchanged since 1957.
Assuming people come to their senses, Arkansas stands to make millions, especially if you factor in the future exploration of Fayetteville Shale — but only if Arkansas raises the severance tax on natural gas.
Some disagreement on this point is inevitable. State Sen. Bob Johnson, D-Bigelow, said recently that raising the tax would be a slap in the face to those industries willing to invest behind Arkansas’ borders. It’s a fair point, but it seems a 50-year period of status quo on any tax rate seems quite generous on the state’s part.
Thankfully, Gov. Mike Beebe agrees. He believes the severance tax is much too low and says it should see an increase. He also thinks the extra funding ought to go toward the state’s bridge and highway needs. With the state lacking several billions in desperately needed funding, and considering the wear and tear that exploration of natural gas adds to the state’s public roads — it’s tough to disagree.
And yet as we have made mention in the past, it may take a miracle to see the state’s rate increase. The reality is that it would take a threefourths majority in both the state House and Senate to force a change. Additionally, it is entirely possible that Johnson will be in charge of the state Senate during the next legislative session, thus making a possibility of a severance-tax hike that much more unlikely.
Happily, Sheffield Nelson might have just come up with a remarkably simple (and obvious ) solution to this frustrating situation. Instead of messing around with the General Assembly, Nelson recently let it be known that he supports raising the state’s severance tax. More importantly, Nelson proposes bypassing the state Legislature entirely and taking the issue to the people in the form of an initiated act. Besides being the GOP’s candidate for governor in 1990 and 1994, Nelson also used to be president and CEO of the biggest gas company in Arkansas — Arkla Inc., which today is part of Center-Point Energy. Surely everyone can agree that Nelson is uniquely qualified to know what a hike in the gas tax might mean for those companies that benefit every day from the state’s natural resources. As such, his opinion really means something. We love his idea of an initiated act. We don’t believe it is very likely that the General Assembly will approve a severance-tax hike during the upcoming legislative session in January 2009. We wouldn’t even bet $ 1 on the prospect of enough legislators coming to their senses. As such, we can’t help being enthusiastic about an initiated act, not to mention the sensibilities of citizens across this state. Of course, nobody likes the idea of raising taxes. But for Arkansas to continue this practice of allowing private industry to make millions off the state’s natural resources while not collecting a fair fee for that right would be irresponsible. A potentially big problem is that Nelson, unlike Beebe, believes at least part of the proceeds ought to go toward colleges and universities instead of roads and highways. Again, the governor makes an excellent point, arguing that higher-education institutions made off with sizable funding increases during the last legislative session. As a result, Beebe says he won’t support Nelson’s initiated act. While the governor may be right in principle — we also believe a majority of extra revenue should go toward highways — the most important thing is to make sure the severance tax on natural gas actually increases. So long as Arkansas remains 49 th in the country in terms of adults holding a college degree, pouring more funding into higher education will never be a bad idea, certainly not one bad enough to sink a reform this necessary. — Northwest Arkansas
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