Mountain States

Colorado Oil and Gas Development Contributes to Strong Tax Base

A recent report from the Economic Policy Institute (EPI), detailing public sector job growth across the nation, underscores the importance of energy development – including oil and natural gas – to the overall health of the economy.

The report identifies the states hiring the most government employees, and according to the Denver Post, energy production is a big part of the story:

[M]any of the states with the strongest gains in local and state government jobs, places like South Dakota, Texas and Wyoming, are located primarily in the nation’s oil patch. A resurgence in domestic oil and gas drilling has helped those states, including Colorado, add jobs and boost overall economic activity.

That seems to support an argument that strong private-sector growth allows for the hiring of additional teachers and public servants, said Gary Horvath, a private economist in Broomfield.

“If you have people working, then you are going to have a strong tax base,” Horvath said.

In Colorado, a separate economic analysis recently found that the natural resources and mining industry is the fastest growing sector in the state with a 10 percent annual growth rate. This economic activity, and the expanding tax base it fosters, is creating opportunities for investment to be made in critical state infrastructure and services.

Previous reports have also recognized the relationship between a healthy energy sector and public revenue growth. One such study, using a dynamic economic modeling program, analyzed the impact of a potential statewide ban on fracking. It found that such a ban would result in dramatic job losses throughout the state’s economy, including public sector jobs.  While that study analyzes the hypothetical impacts of a fracking ban, it is difficult to imagine how those revenue gaps would be filled without significant tax increases or other drastic revenue enhancing measures.

It is well documented that energy production provides an important tax base for states like Colorado, and the EPI analysis is an important reminder of how that translates into helping communities. The 9.9 percent increase EPI found in Colorado’s public sector workforce between December 2007 and June 2014 translates into more teachers, more firefighters and additional public professionals on the job. In turn, these additional workers mean expanded public services that benefit all Coloradans.

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