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Tuesday, March 18, 2014

Legislators as judges: Anything for a tax break for the frackers

Posted By on Tue, Mar 18, 2014 at 7:17 AM

Republicans seem dead-set on overriding Gov. Mike Beebe's veto of transparently unconstitutional legislation to guarantee a tax break on tracking sand, a $5 million hit on the treasury through the subterfuge of declaring sand "equipment." If the law meant anything, they wouldn't.

Sen. Jonathan Dismang provides assurances that the law doesn't mean what it says. The law that says a two-thirds vote is required to take up non-fiscal measures in the fiscal session doesn't apply when the legislature is just trying to "clarify" things, he said. By this theory, clarification of gun, abortion, school or any other law would similarly be exempt from the rule.

House Republican Leader Bruce Westerman whipped out the old saw that this tax is crippling to the exploration of natural gas in Arkansas. I doubt the $1.4 million assessment on Weatherford, an affiliate of a multi-billion-dollar Swiss-based global company that sued over the tax, will drive it out of business. By Westerman's reasoning, we shouldn't tax gas exploration at all. (Wait. Don't tell him I mentioned that.)

Energy companies are selling billions of dollars worth of gas from Arkansas. A single energy company has said it will spend $900 million on exploration this year. While understanding every business wants to reduce every cost to the maximum extent possible, I think we could agree the sand sales tax is neither an emergency nor a make-or-break proposition for the drilling industry.

The law should mean something. The law-and-order Republican majority ought to think about at obeying it when it wants to increase giveaways to an industry already dodging most of the burden of a severance tax that produces only a pittance to offset road and environmental damage in the state. If the will is there, do it right, by a separate piece of legislation with the required two-thirds approval, not by special language trickery.

Practices are mixed around the country on taxing this material, by the way. There's an orchestrated effort to stop the sales tax around the country. Here, for example, is a legal opinion issued in Louisiana in 2010 that found, as Arkansas revenue officials did, that sand and similar "propants" should be subject to that state's sales tax. Texas has for years collected a tax on actual equipment, not just sand.  Drilling seems to continue in  Texas despite this job-killing burden.

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