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Budget talks continue, Gross Production Tax still sticking point

A view of the Oklahoma State Capitol (KOKH)

The stalemate at the capitol continues after the failure of a massive revenue raising bill failed to get enough votes to pass the House without requiring a vote of the people.

For the first time in months, Republican lawmakers invited Democratic minority leaders in both chambers to budget discussions after it was made clear yet again this session that no major funding bill would pass with the supermajority vote required to raise revenue without Democratic support.

Democrats in the House, where all revenue bills must begin, have said for months they would not support any additional revenue measures without an increase in the Gross Production Tax, or GPT.

House Republicans have stuck to the mantra that their efforts to reign in benefits to oil and gas do more. The Republican plan would remove about $50 million worth of tax credits to the oil and gas industry. Speaker Charles McCall told FOX 25 that raising the GPT by two percent, from its current historical low two percent rate, would only bring in an additional $20 million.

The Speaker’s estimates are correct, but only when assuming an increase in the GPT would be applied to new wells that are not currently in place. A cost analysis sent to FOX 25 by the Speaker’s office indicates it was only applied to new wells.

Data from the Oklahoma Tax Commission indicates an increase in the GPT to 5 percent, still lower than many oil producing states and lower than the state’s former average of 7 percent, would bring in more than $150,000 in new revenue.

“Times change, the economy was different when they started negotiating some of these deals now core services are hurting, we're losing teachers left and right we got to start doing somethings to fix these problems and so it's time that everybody sacrifices,” said Republican State Auditor Gary Jones, who is also running for Governor. Jones has recommended raising the GPT to 5-percent, a plan supported by many Democrats and even some oil companies.

House leaders say it's unconstitutional to raise taxes on existing wells.

“We raise taxes all the time,” Jones said in response. “They [Republican budget negotiators] are getting information that is not correct.”

To fully understand the debate, you must first understand how Oklahoma taxes oil and gas activity.

Oklahoma does not tax land based on what mineral rights may exits. Oklahoma only taxes oil or gas once it is brought out of the ground, or produced. Other states tax both.

It would not be possible to tax oil or gas that has already been brought out of the ground.

“I don't know, again, what logic they are using to say you can't raise the rate on future oil and gas that is taken out of the ground and sold,” said Michael Clingman the former Director of State Finance.

Clingman helped craft budgets under former Democratic Governor Brad Henry and worked on budgets for years as Secretary of the Senate.

“It's only on future production on oil and gas coming out of the ground,” Clingman said.

Jones added that legislatures cannot bind future legislatures from changing tax rates. The legislature has changed many tax rates in the past.

Clingman said raising the GPT is on more stable legal footing than the House plan to remove tax credits from the industry.

“If it was a tax credit, you earn that tax credit when you do that act that the credit is meant to reward you for,” Clingman told FOX 25.

“We're now they're looking for change in the sofas,” Jones said, “There is not a lot of other recurring revenue or money sitting there idle that's available.”

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