Only Democrats Could Describe a Billion Dollar Tax Hike as Though It Were a Tax Cut


From the “if you repeat a lie often enough people will believe it” department, consider this letter to the editor from former Democratic state lawmaker Ben Vig.

In it Vig blames Republican lawmakers for creating a “budget conundrum.” That’s true, as far as it goes. Majority Republican lawmakers grow state government too far and too fast during the heady days of oil boom revenues. They also perpetrated a misguided approach to property tax relief, attempting to buy up local tax burdens and hide them in boom-era budget surpluses.

Of course, a lot of Democrats voted for those policies too. But Republicans controlled the legislative chambers, so they get the blame.

But in his letter Vig deploys a talking point oft repeated by Democrats which is simply untrue. He claims that oil tax reform, passed during the 2015 legislative session, is costing the state millions of dollars every month:

In November, a legislator mentioned the state has over 30 percent less revenue in 2017 than 2015. A business would be closing their doors if this was the private sector. The primary reason for a large revenue reduction in state government was that in 2015, the Republicans gave a 1.5 percent tax break to the oil companies, or $18 million per month. That’s right, reducing the oil extraction tax from 6.5 percent to 5 percent has real ramifications, and we are asked to make up the difference. Republicans want us to believe that since oil—being a commodity with an estimated price of $55 per barrel—is low, it results in lower income. We should know better, because we are still paying $2.45 at the gas pump.

This is a lie.

The only way it’s not a lie is if we look at only one part of the 2015 reform – the lowering of the overall extraction tax rate – and not the whole thing. Because lawmakers back then didn’t just lower the extraction rate. They also got rid of a massive exemption from the extraction tax which kicked in when prices were low.

By eliminating that exemption, lawmakers effectively raised taxes on the oil industry. In fact, according to Tax Commissioner Ryan Rauschenberger, the oil industry has paid roughly $1 billion in additional taxes since the reform took effect last year.

“Since January 2016 the state has collected an additional $964 million in oil taxes because the legislature removed the price-triggered-rate-reductions and locked in the current rate at 10%,” Rauschenberger told me yesterday. “By next month we will be at the point where the state has collected $1 billion in additional oil taxes due to the reforms.”

Democrats could argue that the state would have collected even more revenue had they not coupled the elimination of this exemption with a lower overall rate. They’d essentially be arguing for an even larger tax hike on the oil industry.

But that’s not what they’re saying. Vig is saying that this oil tax reform is the “primary reason for a large revenue reduction in state government.”

That’s not true. The net impact on revenues of oil tax reform was a very large increase in revenues for the state.