Oklahoma Oil & Gas Severance Taxes Contribute Over $225 Million to Education in FY2018

A recent Mother Jones article claims, “The Oklahoma governor’s race pits teachers against oil and gas,” but that is far from reality in the Sooner State. In fact, the oil and gas industry is already a major contributor to Oklahoma’s educational system – about $226 million of the industry’s nearly $700 million total gross production taxes was dedicated to education in fiscal year 2018 alone, according to the Oklahoma Tax Commission (OTC).

In fact, a soon to be released report presented to the Oklahoma House of Representatives earlier this week finds that over the last decade the industry’s contribution to the state’s educational system from gross production tax has been approximately $2.11 billion – which doesn’t include sales tax, ad valorem taxes and income tax that also help fund education. Importantly, oil and natural gas tax revenues are distributed to nearly every school district in the state.

OTC’s Executive Director Tony Mastin took some time to explain how these amounts are distributed during his testimony before the Oklahoma House of Representatives this week:

  • Seven percent of natural gas gross production taxes go to counties and local schools where the gas is sourced.
  • The first $150 million – a capped amount – from oil gross production tax goes into special funds that include those for educational purposes. After that, seven percent of the remaining is distributed to counties and local schools.

That said, RegionTrack’s Mark Snead explained during his presentation before the Oklahoma House of Representatives this week, “Total state tax revenue is still highly sensitive to changes in the oil and gas sector.” Snead explained:

“The oil and gas sector is by far the largest influence on overall state GDP growth. It’s essentially 40 percent of growth. That includes both upcycles and downcycles. At times, it literally is the dominant or only major contributor to GDP growth, and at times it has been a huge drag on GDP growth.”

Mastin may have described the situation Oklahoma is facing best:

Can you raise a tax so high that it kills all activity? Of course you can.

As such, increasing taxes even further on Oklahoma’s oil and gas industry when it is already contributing so greatly to the state’s educational system could, in the long term, do more harm than good for Sooner State teachers.

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