Paying a fair share | Arkansas Blog

Monday, January 29, 2007

Paying a fair share

Posted By on Mon, Jan 29, 2007 at 8:37 AM

It was always unrealistic to expect legislators would raise any taxes -- no matter how fair the action -- in a year when they expect to spend nearly $1 billion in surplus.

Just the same, my first major disappointment with Gov. Mike Beebe was his statement ruling dead in the water even before the session began any discussion of the severance tax on natural gas and timber.

It's a state shame that we assess almost no severance tax on gas, thanks to the Stephens' family's long influence over the legislature. When we buy gas from Texas, Oklahoma and other states, we pay a severance tax in those states that supports schools and other parts of govenrment. When Arkansas gas is sold to Texas and Oklahoma, ratepayers there get a bargain because we charge no tax.

With potentially major new production from the Fayetteville shale, it's time again to consider whether producers should pay a tiny bit more for depleting a finite resource, particularly since shale exploration almost certainly will bring some attendant environmental costs.

But, according to a correspondent of the Blog, there's a more pressing concern. He says there's a widespread failure to assess and collect the commercial property tax, particularly in the gas industry. The correspondent sends a short opinion piece on the subject, written by a friend of his with some insight into tax practices. Food for thought.


As Arkansas turns its attention to the possible economic boom that could come from the exploitation of the Fayetteville Shale, it seems a history lesson is in order.

Arkansas has a long history of giving away its natural resources to developers who take the profits and run.   One has only to look  around and see the record of the extractive industries and their impact on the economy of Arkansas.

But while the General Assembly might be considering a higher severance tax, there is a tax that is already on the books that is woefully underassessed and collected.   That tax is on commercial personal property.   The large industries of Arkansas are what is called self-assessors.    They tell the county tax assessor what they own and HOW MUCH IT IS WORTH!!     We ordinary citizens must assess every year and we are told how much it is worth and the tax is assess accordingly.

I am very sure each and every Arkansan underreports what they own, but that is a drop in the bucket when it comes to the value of industrial equipment.

However, let’s take and example of the commercial under-reporting.   The Franklin and Logan County tax assessors have said in public that less than one (1) percent of the gas production companies commercial personal property value is on the tax books.    It is also important to note that once a well is drilled and the natural gas is pumping it must be compressed to get it to flow through the pipeline. It is also important to note the value of all the infrastructure it takes to get the cell phones we carry around to work properly.   And, think of all the equipment that will be coming into Arkansas to convert all that gas in the Fayetteville Shale into usable natural gas that  will all be piped to the Northeast and sold at a high price.    My understanding I that they are already building the pipeline.

The loss of school revenue at present is significant. As an example, Franklin County has 1,243 active gas wells that have to have pumps, pipelines, dehydration units, meters, and separators.     The well itself has an average value of $1.5 to $2 million dollars.   The question to ask is has the attending equipment been assessed and is it on the tax rolls?    There are many other industries involved all across Arkansas. Will this silent corruption be allowed  to continue? Think of the potential loss of revenue as a result of the Fayetteville Shale. These industries must not be allowed to remain on the honor system? The needs of the schools are too great.   Do you think the General Assembly has the political will to do something?   I don’t. Not unless there is a great outcry from the people on this silent corruption.  Meanwhile in the General Assembly, many of these same industries are stepping up and demanding more tax breaks. What will you do??

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