When I joust with progressives about California taxes (especially vs. Texas), one favorite talking point that they raise is the lack of a California oil severance tax — a state tax on petroleum as it comes out of the ground.
They are inferring that the lack of a CA oil severance tax somehow justifies all the OTHER high CA state and local taxes. Of course, a little closer scrutiny shows this assertion is 99% bogus. Higher than 99%, actually. Mathematically higher!
Here’s the executive summary (data and sources below):
In 2015 Texas collected $4.179 billion in severance taxes from their oil and natural gas wells. If we levied the same severance taxes in California on our producing wells, in 2015, we would have raised $498 million — because we produce a lot less oil and gas than Texas.
Contrast that amount with the expected individual income tax revenue projected in the 2016-17 California state budget — $83.841 BILLION! And then there’s that pesky CA state CORPORATE income tax which provides another $10.956 BILLION. Texas gets the job done without such taxes.
Comparing with just the CA individual income tax, our state income tax is 168.4 times larger than this widely ballyhooed “missing” CA oil and natural gas severance tax. Chump change.
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But before I get into the data, let me make one other point. This CA petroleum severance tax excuse is 100% nonsense — when it comes to somehow reducing the OTHER California taxes.
This severance tax has been proposed in CA several times. Not ONCE did the proposal call for the reduction of any other tax — not even a dime.
The goal is always the same — “mo’ money.” Tax fairness or equity is at best a smokescreen to justify the rapacious appetites of progressives and our public employee labor unions for ever higher taxes.
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Okay, okay — three other points:
1. Who do progressives think pays the oil severance tax? The Tooth Fairy? Oil billionaires? Nope.
The tax would be paid partially by other taxing authorities — as such an expense would be applied against the income subject to a CA and federal corporate income tax. Most of the rest would be paid in the form of higher petroleum prices — notably gasoline. As such, it’s largely a regressive tax.
2. It’s not that California LACKS oil and gas. Far from it. We all but prohibit drilling in the Golden State. Or drilling off the state shores. Indeed, we have HUUGGGEEEEEE oil and natural gas reserves. It’s unknown how much for sure, as the oil industry has little incentive to find out — as production is all but banned.
http://money.cnn.com/2013/01/14/news/economy/california-oil-boom/
Of the proven oil reserves, aggressive exploration and fracking have raised the proven Texas oil reserves by 145% from 2009 to 2014, while California’s reserves have remained stagnant during this period.
CALIFORNIA: https://www.eia.gov/dnav/pet/pet_crd_pres_dcu_SCA_a.htm
TEXAS: https://www.eia.gov/dnav/pet/pet_crd_pres_dcu_STX_a.htm
When it comes to oil production, Texas TRIPLED its oil production from 2010 through 2015. CA production changed not at all.
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm
3. Californians pay a very large oil tax already — in the form of gas taxes paid at the pump. In November, 2016 the total average CA gas tax at the pump was 56.6 cents/gallon. Texas was 38.4 cents. Moreover, CA charges a “cap and trade” fee that’s estimated to be 10-12 cents a gallon. Texas has no such tax.
http://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes/gasoline-tax
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THE DATA AND SOURCES
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Oil and Natural Gas Severance Tax Revenue 2015
Texas
Oil $2.879 billion
Natural Gas $1.280 billion
Total $4.179 billion
California None
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2015 Oil Production — Thousands of Barrels Per Day
Texas 3,462
California 551
6.3 times more oil pumped in Texas than in California
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm
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Now, let’s look at natural gas production. Texas blows us out of the water (so to speak):
2015 Natural Gas Production — Millions of Cubic Feet/Year (onshore and offshore combined)
Texas 7,071,203
California 218,590
Texas produces 32.3 times more natural gas than California
http://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_FPD_mmcf_a.htm
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CA state income tax 2016-17
Individual: $83.841 billion
Corporate: $10.956
http://www.ebudget.ca.gov/2016-17/pdf/budgetsummary/revenueestimates.pdf page 148
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Using the above data, if California levied severance taxes at the same level as Texas, our tax collections would be:
Oil $458 million
Natural Gas $40 million
TOTAL: $498 million (a.k.a. peanuts in the California budget)