On Television: Oil Tax Revenues Belong To All Of North Dakota

We discussed oil tax revenues and funding for oil patch needs on Chris Berg’s show on Valley News Live last night (video above).

During the discussion Berg asked me about an oft-made argument about oil tax revenues, which is the idea that because they’re produced in western counties they belong in western counties.

This is a specious argument, and those making it ought to be careful lest it come back to haunt them in the future.

If we turn back the clock a decade or so, the eastern part of the state was producing a disproportionate amount of state tax revenues. Whether we are talking about income taxes or the sales tax, the east had more people and more commerce and was generally driving the most dollars into state coffers.

It would have been wrong if, during that era, eastern leaders had argued that they should get to keep most of those revenues since they produced most of those revenues (maybe they did, that’s a little before my time). State tax revenues belong to the state. The oil extraction and production taxes are state taxes. They produce state revenues to be used for the benefit of the entire state.

It’s ridiculous to argue that because those revenues are produced in a few western counties, those counties should get to keep the revenues. Yet that will be a major part of the debate in the 2015 legislative session. Western leaders are going to want a larger percentage of oil tax revenues than they’re currently getting.

In the short run, as I noted during the segment, that might be ok. I’d be fine with leaving a majority of oil tax revenues in the west as long as we scaled that percentage back over something like a 10 year window.

Here’s why:

I’m afraid that if we leave western counties a mountain of cash they’re going to waste it. The oil patch has very real needs, sure, but we’re still talking about a sparsely populated area. Once we get past this boom stage of the Bakken, they’re not going to need that firehose of tax revenues. If they get it, we’re going to end up with every little community west of Bismarck and Minot having a ridiculous taxpayer-owned water park with indoor surfing like Williston has and Watford City wants.

Suddenly white elephant projects will become “critical infrastructure” as western leaders try to spend more money than they know how to handle. Heck, one western leader through down just that gauntlet recently. “[Mountrail County Commissioner Greg] Boschee said if legislators are worried about giving western North Dakota more money than it can spend, he has a deal,” reported the Bismarck Tribune recently.

“Give it to us and if we don’t spend it … we will give it back,” Boschee told the Tribune. “They always say we can’t spend it. Try us.”

Pardon me if I don’t want to take up that challenge. I never question the ability of politicians to spend indiscriminately.