Oklahoma Senate urging House to add gross production tax increase to budget bill

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OKLAHOMA CITY – Less than a day after a budget proposal failed to pass the Oklahoma House of Representatives, there is some hope a compromise may be on the horizon.

House Bill 1035 includes a tax on cigarettes, a motor vehicle fuel tax, and an additional tax on beer, while giving a pay boost to teachers and state employees.

The plan, first unveiled Monday morning by Governor Mary Fallin and Republican leaders, has drawn criticism from both party lines.

On Wednesday, members of the House of Representatives argued about the measure, which failed to receive the 76 votes needed to pass.

Instead, voting closed with a final vote of 54 to 43.

Democrats said they would not support the plan because it focused on taxing the middle class and did not touch the gross production tax.

However, the Oklahoma Senate may have a plan that could be seen as a compromise for both parties.

On Thursday, the Senate approved a resolution that would request the House of Representatives to amend the original bill to include an increase to the gross production tax of oil and natural gas.

The Senate resolution asks the House to amend the budget agreement to include an increase in the gross production tax on new oil and gas wells to four percent for 36 months.

“Teachers deserve a pay raise and we can’t let mental health services, rural hospitals and child welfare services bear the brunt of massive budget cuts. Though the deal we announced earlier this week achieved those goals, it’s clear it cannot pass unless gross production taxes are included. Adding GPT to the budget deal certainly wasn’t my first choice, but if it breaks the stalemate it is an option we have to pursue. We now have an opportunity to deliver on teacher pay raises, stop massive budget cuts to health care, and eliminate the constant budget problems plaguing our state. I’m grateful my Democratic and Republican colleagues in the Senate showed leadership in approving this compromise to move Oklahoma forward. We’re hopeful our colleagues in the House will act quickly and join us in solving this problem,” said Senate President Pro Tem Mike Schulz.

Senate going back into session to discuss GPT

On Wednesday, House Democrats said that they tried to add the GPT increase and a tax on high earners to the current proposal, but those attempts were defeated.

“We went down to 4 percent today on the floor of House. So for the Speaker to say that he’s done everything he can, he’s either an effect-less leader or he’s disingenuine, you can pick one of the two, I don’t care. But he’s right about one thing- this is bs. We should have a better plan. Those people who were here yesterday deserve a better plan. We got here because we cut the gross production tax. We got here because we cut the income tax. Are either one of those a part of this? No. We are shifting the tax burden of this state to the working poor and the indigent. And for Chairman Wallace to say, ‘Well, it taxes everybody across the board.’ We all know it’s a regressive tax. It hits the poor and the least among us the hardest. I’ve heard nothing but disingenuous claims from the majority caucus for the better part of two months. We are not going to change our vote. The Speaker can close it and go back to the negotiating table and come back with a solution that works for everybody in Oklahoma, not the wealthy, not an industry, but every single Oklahoman,” Rep. Cory Williams told News 4 on Wednesday.

Senate Republicans said they will not go above four percent on the gross production tax, adding that they won’t have the votes for anything higher.

The House Democratic Caucus says it supports the resolution and hopes that it will pass.

“We are pleased that the Senate has confirmed their willingness to bring gross production tax to the negotiating table. Though not specific regarding the length of time of the incentive rate, Senate Resolution 1 indicates a willingness to have a discussion around an increase to 4 percent. The House Democratic Caucus joins with Senate Democrats to support an increase to the incentive rate to help put the state’s financial future on a more stable path.

We encourage the Republican House Caucus to stand with their colleagues across the rotunda, include an increase to the gross production tax in their revenue plan, and allow a vote tomorrow in order to complete the work our constituents expected us to do months ago.”

Now, the Oklahoma Independent Petroleum Association is speaking out against the Senate’s resolution.

“We are disappointed the Senate has joined House Minority Leader Inman and his caucus in calling for increased taxes on Oklahoma’s defining industry because increasing the state’s gross production tax for new wells harms Oklahoma businesses and harms working Oklahomans.

The oil and natural gas industry is proud of its role as the economic backbone of Oklahoma. The tax dollars generated and the jobs created in the state’s oilfield account for approximately 25 percent of all taxes paid in Oklahoma, which means one industry funds one-fourth of teacher pay, state-funded healthcare, public safety, transportation infrastructure and all other government-funded services.

When the state faced budget shortfalls in 2010, 2014, 2016 and earlier this year, lawmakers turned to the oil and natural gas industry by increasing the state’s gross production tax or eliminating tax provisions created to encourage investment in Oklahoma’s oilfields. The continued erosion of tax policy that has drawn billions of dollars of investment capital into the state will only reduce our state’s ability to attract new drilling.

Working Oklahomans work in the oilfield, and tax provisions that encourage oil and natural gas exploration keeps more Oklahomans working. With 20 percent of Oklahoma’s workforce tied to the oil and natural gas industry, decreased drilling caused by any increase in the state’s gross production tax would negatively impact toolpushers, roughnecks, pipeliners, welders and other oilfield workers who rely on continued drilling to support their families in communities across the state,” said OIPA President Tim Wigley.

Earlier this week, the Oklahoma State Department of Health  announced that it had notified contracts for Federally Qualified Health Centers and Oklahoma Child Abuse Prevention programs that state funding was coming to an end.

Also, the Department of Human Services created a list of the programs that would be affected if the agency lost $69 million. 

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