Energy-consuming states chafe at resource taxes
Atlanta — As your fuel bills continue to mount, so do severance tax revenues in states producing oil, natural gas, and coal. Because severance taxes usually are based on a percentage of the value of the resource as it is taken from the ground, as resource prices go up, so does the state's tax take.
If you live in a state with such production, that means that probably pay less in other state taxes. Taxes, for example, has no income tax but gets one-fourth of its revenue from the "severance" tax on oil and natural gas.
But if you live in one of the 38 or so energy "have not" states -- those that import more energy than they produce -- you carry an extra burden, officials in a number of these states argue. They want to limit the percentage states may charge on severance taxes.
Already skirmishes are being fought before the Supreme Court and in Congress between the energy "have" and "have not" states:
* The high court has agreed to hear arguments by Commonwealth Edison and 10 other utilities that Montana's 30 percent severance tax on coal interferes with interstate commerce.
* The court recently heard arguments in a case brought by nine East Coast and Midwest states challenging Louisiana's severance-like tax on offshore natural gas bought into the state.
* Sen. David F. Durenberger (R) of Minnesota has introduced a measure that would limit to 12.5 percent the severance tax on coal taken from federal or Indian land. The bill is similar to a House proposal introduced during the last session of Congress that would have limited coal severence taxes to 12.5 percent. That bill passed a House committee but never reached a full House vote.
But the largest amounts of severance tax collections are for oil and gas. And there is some feeling a ceiling on severance taxes would quickly inspire states with a tax rate below the ceiling to raise their tax.
these skirmishes, according to some anaylsts, may break into an energy "war" unless peaceful solutions are found.
It would not be a North vs. South, frostbelt vs. Sunbelt affair. Alaska, for example, is on the "have" side, along with Texas, Oklahoma, Louisiana, Montana, and others. Florida is one of the "have not" states.
"It's a potential source of great conflict among the states," says Peggy Cuciti, of the President's Advisory Commission on Inter-governmental Relations. And as the Reagan administration seeks to cut federal funds, forcing states to look for alternative revenues, the issue of state severance and other energy taxes is likely to grow, analysts say.
Energy-rich states could become "a kind of United American Emirates -- a group of superstates with unprecendented power to bagger their neighbors . . .," says Tom Cochran, executive director of the Northeast-Midwest Institute.
Florida state economist Tony Higgins is concerned about the potential for a round of "retaliatory" taxe between states. Florida has a 10 percent tax on phosphate (and produces most of the nation's supply). But that state is a major importer of oil and thus "very vulnerable," says Dr. Huggins.
Texas's severance tax collection (the nation's largest) on oil and gas jumped from $1 billion in 1979 to $1.5 billion in 1980. They are projected to reach nearly $9 billion in 1990, according to state officials.
Some 25 states have severance taxes ranging from 1 to 30 percent on minerals. But a handful of states collect most of the severance tax revenues: in 1979, they were Texas, Louisiana, Oklahoma, Alaska, New Mexico (uranium), and Kentucky (coal).
Are percentage-based severance taxes fair? Yes, says University of Texas economics Prof. Bernard L. Weinstein: "It [the severance tax] is a windfall in the short term. The question is, how long is that going to last?"
Officials in oil states stress that their oil will not last forever. Officials in states like Montana, which has a 30 percent tax on coal, argue they have high costs associated with energy "boom" towns (more roads, sewers, and schools, for example).
But critics remain unconvinced.