Increased gross production taxes fueling Oklahoma’s revenue boom

Oklahoma is currently enjoying a period of exceptionally strong revenue growth. As we near the end of FY 2019, General Revenue collections have already come in $360 million ahead of the year’s estimate, which will ensure a large endof-year deposit to the Rainy Day Fund. Next year’s revenues collections are projected to be more than 20 percent higher than last year’s, which has allowed the Legislature to approve two straight years of substantial funding increases.

Much of the credit for the prosperous fiscal situation is due to rising oil and gas revenues. In recent sessions the Legislature curbed tax breaks for the oil and gas industry that had allowed a growing share of production to be taxed far below the standard 7 percent rate. Until 2017, some older wells were taxed at just 1 percent during their first three years of production while new wells were taxed at just 2 percent for three years. In 2017, the Legislature restored the rate for all existing wells to 7 percent and then in 2018 restored the rate on new wells to 5 percent for the first 36 months.

Some in the oil and gas industry warned lawmakers that higher tax rates would stifle production and harm the energy industry and overall state economy. This has not appeared to be the case. Oil and gas production is currently at all-time highs in Oklahoma as well as nationally. Over the 12-month period through February 2019, Oklahoma oil production averaged 17 million barrels, which is 30 percent higher than during the peak years of the early 1980s.

 

 

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