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This severance tax debate provides a perfect case study of your governor, Mike Beebe.
He is practical, a problem-solver, not ideological or driven by burning principle. He is a compromiser, a deal-maker, not confrontational. He is tactical and strategic, not visionary. He works quietly and privately, more like a confirmed legislative insider, which he's always been, than a preacher from a bully pulpit. He is satisfied with safe increments, not daring or bold.
You have Sheffield Nelson talking about an initiated act to raise our microscopic severance tax on natural gas to 7 percent of market value. You have Sen. Bob Johnson of Bigelow, the incoming leader of the Senate, saying there will be a legislative enactment to raise the sales tax over his dead body, more or less. They've been calling each other clowns, or clownish.
You have Beebe quietly surveying the vast, fertile and demilitarized field left for him in between.
There has long been a compelling reason, even a moral imperative, to raise our state's comically low severance tax on natural gas. It is that we don't sufficiently value our natural resources and that we sell ourselves on the cheap. Meantime, our people pay higher severance taxes on much of the gas they buy, which comes from out of state.
Perhaps you have heard Beebe make that obvious case. But I haven't.
All I've heard him say is that we have a practical problem and that he sees a practical solution.
The practical problem is that our highway system needs work, but that, as gasoline prices rise and consumption lessens, we lose highway revenue because we rely on a per-gallon tax on gasoline, meaning consumption, rather than a tax elastic with price.
The practical solution is that Beebe has gazed upon north-central Arkansas where big out-of-state gas exploration companies happen to have figured out how to drill economically for the apparently abundant gas in what's called the Fayetteville Shale.
We need highway money. Oh, there's some right there. That's Beebe's assessment of the issue.
So what is Beebe proposing, exactly? Nothing, exactly. He says our severance tax rate ought to be equal to that of surrounding states. But he has left open the possibility that we need to consider the over-all corporate tax structure in making that calculation. Some of those surrounding states apparently have lesser corporate taxes than ours. So Beebe is in a position to accept a negotiated rate and call it parity.
All he has done is inform the natural gas industry that he'd like it to come to the table for talks about what kind of severance tax it would accept, drawn by the prospect that, if no agreement is reached, he might go to the voters with an initiated act in a couple of years.
But then along came Nelson wanting to go straight to the people now with a specific proposal — 7 percent of value — because he doesn't trust that the Legislature would ever meet the three-fourths threshold needed to raise the severance tax.
What has Beebe said about Sheffield's 7 percent? Again, nothing. He only argues that Nelson shouldn't dedicate any of the proceeds to higher education, since highways are the problem.
The man can focus and prioritize.
Beebe doesn't argue Nelson's accelerated time frame very strongly. That's because it suits his purposes. Sheffield's initiative gives the natural gas industry even more incentive to come in and work on an agreed-to proposal to be presented to the legislature.
Even Johnson said the other day that he supposes he might be able to vote for raising the gas severance tax if the industry agreed to it.
This comes down to a number. We charge practically nothing in severance gas taxes now. Nelson threatens to try to get the voters to impose 7 percent.
Is there something between zero and 7? Is it, oh, 4?
The industry would grumble. Progressives would argue that Beebe took half a loaf. Beebe would say you can make a lot of sandwiches and eat several lunches with half a loaf.
John Brummet is a columnist and reporter for Stephens Media's Arkansas News Bureau.
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