UPDATE: Burgum has clarified his comments on the oil extraction tax. He says he supports the lower rate and would have signed the bill creating it into law had he been governor in 2015. Also, I mistakenly attributed comments about the lower rate being a give away to Burgum in the post below. Those weren’t his words but rather those of the man interviewing him. That error was mine.
We have our first major policy conflict in the race for the NDGOP nomination for governor, and it’s over the oil tax reforms passed by the Legislature last year.
To catch you up, in case you haven’t been following along, during their 2015 session state lawmakers got rid of a massive exemption to the state’s oil extraction tax triggered by low oil prices. If they hadn’t, the current oil price rout would have cut the state’s oil tax take from 11.5 percent down to 5 percent, throwing what is already a tumultuous budget situation into utter chaos.
As a compromise, since lawmakers were taking a massive tax break from the oil industry at a time when they’re already taking a beating, they lowered the top rate from 11.5 percent to 10 percent. Or 11 percent when oil goes back over $90 per barrel.
Democrats hated the reform, even considering punishing a member of their legislative caucus for even negotiating with Republicans on it. They didn’t mind taking the tax exemption away from the industry, but they didn’t like the slight reduction in the top rate which was given as a compromise.
[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#ffffff” txt_color=”#000000″]Burgum – who, we should remember, is seeking the Republican endorsement for governor – siding with Senator Flakoll and the Democrat superminority isn’t going to win him a lot of friends among Republican lawmakers who wield a not insignificant amount of influence on Republican voters in their districts.[/mks_pullquote]
Now Burgum is siding with the Democrats,telling a talk radio host on Friday that it was akin to giving away some $700,000 per day to the oil industry.
For the record, both of Burgum’s opponents support the reform. State Rep. Rick Becker voted for it in the Legislature, and Attorney General Wayne Stenehjem was unequivocal in his support when I asked him about it during a radio interview on Friday (audio).
I suspect Republicans are going to see some problems with Burgum staking out that position.
UPDATE: I mistakenly attributed the give away comments to Burgum. Those were not his words. For one thing, conservatives generally don’t like it when tax rate reductions are talked about as a sort of give away. We are not, after all, talking about the sort of tax credit subsidies Burgum’s companies get for real estate development. A tax rate is a percentage the government takes from a specific stream of revenue. When the government lowers the rate, it is not “giving” anything other than tax relief. Talk of the government giving away money by taking less is the sort of thing that sets the teeth of fiscal conservatives on edge.
Fiscal conservatives being the sort of Republican voter Burgum is trying to win over, since he isn’t making many friends among social conservatives.
Another problem for Burgum is that Republican support for this policy change was nearly unanimous in the Legislature. Every single member of the Republican legislative super majority – save state Senator Tim Flakoll of Fargo – voted for the legislation.
Burgum – who, we should remember, is seeking the Republican endorsement for governor – siding with Senator Flakoll and the Democrat superminority isn’t going to win him a lot of friends among Republican lawmakers who wield a not insignificant amount of influence on Republican voters in their districts.
Finally, this position on a high-profile issue is going to hurt Burgum among voters he needs the most. Last week I wrote about the “uncanny valley” of Burgum’s political appeal. The principal problem of his campaign is how he can raise his notoriety and appeal among conservative western North Dakota voters without eroding his appeal with more liberal eastern North Dakota voters.
Trashing tax reform done for the benefit of western North Dakota’s most important industry is not how you accomplish that objective.