The Oklahoma Senate is trying to break a stalemate between House Republicans and Democrats. On Thursday, the Senate passed a bipartisan resolution, urging House leaders to include in their budget plans a tax increase on oil and gas production.
The Senate resolution called for a hike in the gross production tax from 2 to 4 percent during a well’s first 36 months of production.
Sen. Greg Treat, R-Oklahoma City, is confident his chamber could reach the required three-fourths majority to pass the tax package.
“We think we can do it. We think this is a package that deserves their support,” Treat said.
The House package, which failed on Wednesday, includes a $1.50 tax increase per pack of cigarettes, a 6 cent tax increase on fuel and tax increase on low point beer. All House Democrats voted against it because it did not include a gross production tax increase.
“Four percent is what the Senate Republican caucus has been comfortable with for a while. We are not comfortable going higher than that,” Treat said.
Currently new wells are taxed at 2 percent during their first 36 months of operation. After that, the rate jumps to 7 percent.
Treat said a tax increase to 4 percent for 36 months would amount to $15.2 million in additional revenue over the first full fiscal year. He says that amount of revenue won’t solve the state’s budget woes, but it is symbolically important to the public and the Democratic party.
Assistant Democratic leader Eric Proctor, D-Tulsa, said the Senate’s resolution is a step in the right direction. He indicated he would prefer the 4 percent rate for the first 12 months.
“The difference between 36 months at 4 percent and the difference between 12 months at 4 percent is over $100 million annually that could be invested in education or our crumbling infrastructure or our public safety,” Proctor said.
Proctor said House Democrats have been compromising since the beginning of negotiations, when they wanted a 7 percent rate on all wells.
“We don’t like the cigarette tax, we don’t like the gasoline tax, we don’t like a large portion of the plan,” Proctor said. “But we’re willing to compromise for what’s best for Oklahoma. But they [House Republicans] have to compromise, too. A compromise is not just a one-sided thing. A compromise is not capitulation on every single issue. They’ve got to meet us in the middle.”
Senate minority leader John Sparks, D-Norman, says there’s still no agreement on terms, and he simply wants the gross production tax to be a part of the budget’s grand bargain.
“I think we have the potential to be closer. These budget negotiations are always an ebb and flow. I hope this creates movement. I hope that there are some other things that we can discuss as part of this,” Sparks said.
Legislators are in special session to fill a $215 hole in the current fiscal year’s budget. Without an agreement, the Oklahoma Department of Mental Health and Substance Abuse Services, the Oklahoma Healthcare Authority and the Oklahoma Department of Human Services face massive budget cuts.