Governor John Kasich stood by his proposal to increase severance taxes on oil and natural gas “fracking” in Ohio, framing the plan as a boost for small businesses on the backs of Big Oil during a question and answer session at an Ohio Farm Bureau event. Marc Kovac of Ohio Capital Blog posted a video of the question from Harrison County Farm Bureau President Jayne Wallace and Kasich’s response.
The video follows, with a transcript of the governor’s comments at the end of this story.
“I feel like we’re being penalized for owning that property that happens to have oil and gas under it. I have paid taxes on it,” Wallace said. “The entire state is seeing benefits from the oil and gas industry, not just the eastern part of Ohio.”
“An increase – a modest increase – in the severance tax on Big Oil will allow us to reap some of the benefit of that oil, which they’re pulling out of the ground and is a diminishing resource,” Kasich – a Republican – said in his reply.
Kasich spoke as if the natural resources in citizens’ property belong to the State of Ohio. Since first proposing the tax increase in early 2012, the governor has consistently portrayed his plan as an “income tax cut” which would take a tiny portion of profits from “Big Oil” for redistribution across Ohio.
“They all know it’s coming, by the way, and it’s very reasonable,” Kasich added, suggesting the proposal has not had and would not have any negative impact on oil and gas drilling in the state.
Addressing Wallace’s concern that she would pay higher taxes to fund a statewide income tax credit, Kasich said, “I don’t know what your situation is, but if you have it on your land, and you negotiated a bad deal with the oil companies and you have to pick up the severance tax, I mean, I wouldn’t have done it that way if I were you.”
At a July press conference intended to promote the severance tax hike as an income tax cut, Governor Kasich conceded that his proposed tax increase may hit some landowners.
Although the governor reiterated in his response to Ms. Wallace that “Big Oil” ships its profits out of the state, Media Trackers reported in August that Exxon and Chevron are two of the largest holdings in Ohio’s public pension funds.
In June, Media Trackers spoke with Jerry James, president of both Marietta-based Artex Oil Company and the Ohio Oil and Gas Association, who explained a number of issues with the governor’s proposal. James also appeared in a brief video released by conservative think tank Opportunity Ohio in September.
A poll commissioned by Opportunity Ohio in July showed broad disapproval for the arguments underpinning Kasich’s severance tax proposal. Opportunity Ohio also disputed Kasich’s severance tax talking points in an August white paper and an October study.
The governor’s plan faces opposition from the Ohio Liberty Coalition, Americans for Prosperity Ohio, and the National Taxpayers Union. Americans for Tax Reform (ATR) deemed the plan compliant with its Taxpayer Protection Pledge so long as all new revenue was used for an income tax cut, but ATR has since expressed support for a pledge against any severance tax hike.
The Ohio Farm Bureau posted information about the governor’s proposal on its website in July, inviting members to provide feedback on the issue. A request for comment sent to the Harrison County Farm Bureau received no reply in time for publication.
Following is a transcript of Kasich’s comments in the above video clip.
Kasich: First of all, we already have a severance tax in Ohio. And I don’t think it’s unreasonable to say to major oil companies that you should pay more than 20 cents on – what, I don’t know what a barrel of oil is worth today, $80 or $90? 20 cents on an $80 or $90 barrel of oil.
You know what they do with their profits? They take it out of Ohio.
You know what they do in Texas and Oklahoma? They have very high severance taxes. And what they do is they ship their costs out here. So Texas has no income tax, Oklahoma’s cutting their income tax. North Dakota is on fire, and they have a higher severance tax than we do.
An increase – a modest increase – in the severance tax on Big Oil will allow us to reap some of the benefit of that oil, which they’re pulling out of the ground and is a diminishing resource. So, I would rather have our communities, our citizens in Ohio – across this state – reap a benefit, in lower taxes, in more money in community and local banks, instead of letting them take all of their money out of here.
Now, ma’am, I don’t know what your situation is, but if you have it on your land, and you negotiated a bad deal with the oil companies and you have to pick up the severance tax, I mean, I wouldn’t have done it that way if I were you.
But the fact of the matter is that that severance tax – and they all know it’s coming, by the way, and it’s very reasonable – they all know that it’s coming, they’ve invested billions of dollars in this state. We went through an oil boom one other time here in this state, and they took what we had and they left. This time, I wanna make sure that all Ohioans get a benefit.
And the idea that we have a modest increase that keeps us below the tax rate of every other state in this area and allows us to lower our income tax, boy, that’s a bluebird that flew in the window. You know, I can respect people that don’t agree with it, but, you know, frankly, every Ohioan oughta benefit, and frankly I’m for Ohio small business more than I am for Big Oil.