Favorite

The lowly severance tax 

The Christmas mail brought unexpected manna, an oversized greeting card from Justice Jim Johnson stuffed with a serviceable old necktie and a plea that I renew an old campaign to get the state to collect a severance tax on natural gas, one of the great defaults in Arkansas history. Should I succeed, Johnson promised in his big florid hand, “generations of children shall rise up and call you blessed.”

It was an attractive invitation but, alas, it was more than a low journalist could ever deliver. It was more than Bill Clinton at his peak could deliver and possibly more than Gov. Mike Beebe could deliver, if he were to be so bold as to try.

Justice Jim, the only man ever to receive the Democratic Party’s nomination for governor and the Republican’s for chief justice and to lose both times, has sometimes exercised a misplaced sense of injustice, but on such matters as the taxing of the poor and the rich he has been right on the mark.

Gas is a perfect case of economic injustice. The working stiff pays a dear tax rate for the gas that warms and feeds his family, 7 or 8 percent on the price of the gas, depending upon the town where he lives. But the big corporate producers reap a profit of 20 percent or so on the resource they sunder from Arkansas earth and they pay no taxes on it. Well, all right, they pay three-tenths of a penny on each thousand cubic feet they pump from the ground, which is no more than a nuisance to them and barely meets the government’s expense of collecting it.

No state in the union but Arkansas surrenders its precious natural resources to commercial operators and asks that they return so little to the public trust to compensate generations for the loss. If a tax can have a moral imperative, it is one levied on finite resources that can never be replenished.

If anyone is to earn the hosannas of generations, maybe it will be Sheffield Nelson, former Republican candidate for governor, state chairman, national committeeman and head gas man. Nelson wrote an op-ed article in the Arkansas Democrat-Gazette Sunday making a compelling case for Gov. Beebe and the legislature to enact a real severance tax on gas at this session. Nelson has been in this good fight before, but more in a minute about that.

The moment is right and about to pass, Nelson argues, because the big production companies are buying up drilling rights across a huge arc of the state and a great surge of exploration in the untapped Fayetteville Shale is under way.

Over the 30-year life of the fields at current market prices, the companies will take an estimated $300 billion from the shale and pipe nearly all of it at vast profit to industries and homes in the Ohio River Valley and points east. Except for the royalty owners and those who get work in the exploration, Arkansas will get little from it.

If Arkansas were to tax natural gas at Texas’s rate — Arkansans like to admire Texas’s low taxes — Arkansas could collect close to $20 billion over the next three decades for colleges and universities, which are Johnson’s and Nelson’s preferred beneficiaries.

But here is a more politically palatable idea for this governor and legislature: Use the proceeds of the severance tax to eliminate the sales tax on natural gas for homeowners and maybe on electricity and water, too. There is a tax cut that would help the genuinely poor, who bear a proportionately larger tax for energy than do the more affluent because their homes are inefficient.

You wouldn’t be killing Arkansas businesses. Eighty percent of the gas exploration in Arkansas is by out-of-state companies. The tax, even at the Texas rate of 7.5 percent of the wellhead price, would still be nothing more than a nuisance. They deduct it on their federal tax returns.

Justice Jim’s theory is that the tax can finally pass, in spite of the constitutional requirement of a three-fourths vote in each house, because the men who blocked the tax for 60 years, Witt and Jack Stephens, no longer have terrestrial interests.

A little history. Witt acquired extensive gas interests and a West Arkansas distribution company in the 1940s. Arkansas actually levied a modest severance tax on natural gas then, 2.5 percent of the market price, but in 1947 the legislature and Gov. Ben Laney made Witt, already a political mover, happy by slashing the tax to almost zero: three-twentieths of a penny per thousand cubic feet. When Gov. Orval Faubus needed to balance a sales tax increase with a business tax in 1957 to show that he was fair-minded, Witt let him raise it to three-tenths of a penny.

Clinton wanted to do the same thing in 1983: balance his sales tax levy with a progressive severance tax. Nelson, who had succeeded Witt as president of Arkansas Louisiana Gas Co. and was warring with him over transporting Stephens’s gas through Arkla lines, came out in support of the tax. The tax rate would have meant little to Witt financially but this was personal. Raising the tax would be a slap at him. “If Bill raises the gas tax,” Witt told me one day, “he’ll never be elected to another office as long as he lives.” Clinton quietly let the bill die.

Justice Jim and his Republican sidekick Sheffield think Mike Beebe and this legislature are guided by better impulses. I don’t think so.

Favorite

Sign up for the Daily Update email

Comments (2)

Showing 1-2 of 2

Add a comment

 
Subscribe to this thread:
Showing 1-2 of 2

Add a comment

More by Max Brantley

  • Where's the outrage?

    Am I the only person, apart from federal prosecutors, outraged about the criminal enterprise that inveigled itself into a privileged position as an Arkansas taxpayer-financed human services provider to the tune, today, of $43 million a year?
    • Jun 21, 2018
  • Where's the outrage?

    • Jun 21, 2018
  • Rutledge opponent hits her socializing with corporate interests

    Mike Lee, the Democratic candidate for attorney general, has criticized Attorney General Leslie Rutledge over recent reports of her participation at private meetings where corporate interests make big contributions to a political group she heads for access to state legal officers.
    • Jun 21, 2018
  • More »

More by Ernest Dumas

  • Inhuman America

    Our history has included some evil passages — slavery and white supremacy, the forced removal of Native Americans from their homes, the imprisonment and dispossession of Japanese Americans during World War II, the torture of prisoners in latter-day wars — but it is also a part of our history that we came to officially regard them all with shame, as offenses to the human rights that were our original values.
    • Jun 21, 2018
  • Legislative boodlers

    Which sounds like the best use of your taxpayer dollars: helping pay for medical care for unemployed people, or bribing and lobbying legislators and other government officials to bestow millions of your tax dollars on a corrupt organization that claims it helps poor people who have drug problems or disabilities?
    • Jun 14, 2018
  • Scary Granny Pelosi

    Nancy Pelosi has replaced Barack Obama as the all-purpose bete noir of Republican politicians, including Arkansas's, but will she be as potent as the black president?
    • Jun 7, 2018
  • More »

Readers also liked…

  • Along the civil rights trail

    A convergence of events in recent days signaled again how far we have come and how far we have yet to go in civil rights.
    • Jan 18, 2018
  • The Oval outhouse

    One thing all Americans finally can agree upon is that public discourse has coarsened irretrievably in the era of Donald Trump and largely at his instance.
    • Jan 18, 2018
  • Shrugging off sulfides

    The Arkansas Democrat-Gazette reported a shocker on its front page Sunday. The rotten-egg odor from the Koch brothers' sprawling paper plant at Crossett is still making people sick, but the state's pollution control agency is unaware of the problem.
    • Mar 29, 2018

Latest in Ernest Dumas

  • Inhuman America

    Our history has included some evil passages — slavery and white supremacy, the forced removal of Native Americans from their homes, the imprisonment and dispossession of Japanese Americans during World War II, the torture of prisoners in latter-day wars — but it is also a part of our history that we came to officially regard them all with shame, as offenses to the human rights that were our original values.
    • Jun 21, 2018
  • Legislative boodlers

    Which sounds like the best use of your taxpayer dollars: helping pay for medical care for unemployed people, or bribing and lobbying legislators and other government officials to bestow millions of your tax dollars on a corrupt organization that claims it helps poor people who have drug problems or disabilities?
    • Jun 14, 2018
  • Scary Granny Pelosi

    Nancy Pelosi has replaced Barack Obama as the all-purpose bete noir of Republican politicians, including Arkansas's, but will she be as potent as the black president?
    • Jun 7, 2018
  • More »

Most Viewed

  • Trump doctrine

    Let's face it: President Trump enjoys hurting and humiliating people, and that's the thing some of his loudest supporters like about him. Making women and children cry makes him feel manly and powerful. The more defenseless, the better. He particularly enjoys punishing racial minorities.
  • The battle over Issue 1

    The odds are that the most spending in a statewide campaign in Arkansas this year will not be for a constitutional office, but instead in a battle over a proposed state constitutional amendment.

Most Recent Comments

  • Re: The cult of Trump

    • That isn't what I said, and you know that pretty well, Oaf. Just lies and…

    • on June 23, 2018
  • Re: The cult of Trump

    • Rabbi, you probably don't know Steven. He's the head Kool-Aid taster for the Trump cult…

    • on June 22, 2018
  • Re: The cult of Trump

    • Those traits sound like most any politician in DC, mostly the Dims.

    • on June 22, 2018
 

© 2018 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation