Oklahoman: On Energy Tax, If You Want Less Of Something, Tax It More
In drilling tax debate, Oklahoma lawmakers should recall past tax lessons
The Oklahoman Editorial
AS lawmakers debate whether to increase the gross production tax levied on horizontal drilling, they should keep in mind this old warning: If you want less of something, tax it more. Recent experience in Oklahoma shows that when taxes and fees become excessive, economic activity declines.
In 2010, facing a giant budget shortfall, lawmakers opted to increase many fees. Vending machine operators, in particular, were hit hard. Instead of paying a sales tax on items sold, vending machine operators buy a decal for a flat rate each year. In 2010, lawmakers voted to triple that fee, from $50 to $150.
Gov. Brad Henry defended fee increases at the time, saying budget writers were careful to “only increase fees that hadn’t been increased in literally decades to bring them up to the cost in general of the service provided. It would have been an easier exercise to just cut every agency by 15 or 20 percent and go home, but it would have left our economy in shambles.”
Instead, the fee increase made a shambles of the vending machine industry. According to Oklahoma Tax Commission records, the state had more than 54,000 vending machines at that time. By 2011, industry officials were projecting a 30 percent reduction in the number of machines due to the fee’s impact.