Severance tax = wealth redistribution. If you own land in eastern Ohio, you lose!

Not to be political, but I fear that Gov. Kasich has abandoned his own principles with his proposed 4% severance tax.  Directly or indirectly, it is the landowner who will bear this new tax every time O&G companies deduct it from the landowner's royalty.  A landowner's minerals belong to the land-owner, not the state.  The state should not have the right to take away a percentage our our assets and give them to someone else.  To be blunt, that is simply wealth redistribution.

 

At a 15% royalty, a decent Utica well can easily net royalties of $15,000 per acre.  If I happened to own 100 acres of land, my 4% severance tax on $1.5M in royalties would amount to $60,000 (in addition to $576,000 in federal & state income tax estimated at 40%).  Why should the State have the right to take another $60,000 out of my pocket, and then dole it out as a fraction of a penny to each of Ohio's millions of taxpayers?  My burden results in a meaningless benefit which won't convince any Ohioan to start a business or not move to Florida.  Landowners need to do the math...  even a homeowner with a 1-acre lot is going to pay $600 in severance tax, and in return get a meaningless tax break.

 

Gov. Kasich thinks that he hatched a "populist" plan...  who wouldn't like a tax cut?  But this is unfair and unconstitutional --- being financed out of the pockets of landowners who are already going to be paying more than 40% in federal and state income taxes on their royalties, not to mention property taxes, CAT taxes, etc.  I would rather give that same amount of money to my local school district where it can make a difference and will benefit my own community.

 

Let's face it...  the state is already going to be receiving a huge windfall of increased income tax revenue from all of the taxpaying landowners who are receiving bonus payments and royalty income.  Why can't the state simply give some of that money back?  Why do they need to mandate a new additional 4% tax for distribution to the masses?  It's unnecessary, and it's designed to prevent the state from giving back one dime of its ballooning revenue.

 

Here's a even better idea...  and if you agree, please call the govenor's office as well as your state representatives.  The State of Ohio owns nearly 600,000 acres of public land in Ohio.  This land belongs to the tax-paying citizens ---  we are the owners, and the State is merely the caretaker.  Let's have the State lease out portoins of this public land where practical, and then use all bonus payments and royalties to give a dollar-for-dollar tax break to the citizens of Ohio.  This is the fair and principled approach, and would result in a much larger potential tax cut for the people given the state's massive land holdings.  Let the public benefit financially from the public's own land.  Don't steal it from the private landowner's pocket !

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Replies to This Discussion

Permalink Reply by Utica Shale on May 10, 2012 at 9:49am

Garfield,

"... Severance tax = wealth redistribution. If you own land in eastern Ohio, you lose! ..."

 

 But what if my lease states that the DRILLER must pay that expense  ?

 

Permalink Reply by Garfield on May 10, 2012 at 9:54am

Then you've probably already paid your severance tax in advance...  either it was discounted out of the bonus payment that your driller would have otherwise paid, or it reduced the royalty percentage they would have been willing to pay.

Permalink Reply by Kathleen on May 10, 2012 at 11:35am
We got the upper bonus and % with the wording they pay all severance and excise (sp) taxes.
Garfield. I wrote the governor about this when it was first reported. After a few days I received a form letter saying thank you for contacting the governor he appreciates you taking the time to write in. No mention of what I wrote in about, my concerns, nada, zip, zlich.
Permalink Reply by Garfield on May 10, 2012 at 12:08pm

At least he was courteous to reply, even if the content of your letter was ignored!

Permalink Reply by scott david gill on May 10, 2012 at 3:52pm

utica shale - your quote above is brilliant, and I mean that sincerely.  Those 13 words are all you need to let your state rep and senators know because I guarantee the R's will shudder at the notion of voting for a wealth redistribution bill, especially if they plan on running for US Congress anytime soon.  Spare the liberal label on me because I'm also an R - just one who knows that any tax increase targeted to one class of taxpayer's is nothing short of socialism.  Does the Obama "Buffet Tax" come to mind here?  Tell your cafeteria conservative state rep they need to stay true to their principles, if they still have any!!  Also remind them that when the Gov took office he stated that "every Ohioan needs to sacrifice to pull Ohio out of the $8 billion budget hole" - not just local governments and the O & G industry.  His words not mine!

Permalink Reply by David Mohn on May 11, 2012 at 2:58am

For all of you that are opposed to this severance tax I urge you to please write letters and make phone calls to the governor and senators of Ohio.  Here is the phone numbers and addresses.  If we landowners stand up against this taxation without representation we can make a difference.  This is election year so we can make our voices heard loud and clear.  I know us landowners are busy in the fields but we can call from our tractors and voice our opinions.  Lets show Ohio that landowners have worked hard for years and we should have something to show for it. 

 

Governor Kasich

Riffe Center  30th Floor

Columbus OH  43215-6117

614-466-3555

 

Frank LaRose

Senate Building

1 Capitol Square 2nd Floor

Columbus OH 43215

614-466-4823

 

Senator Jones  Chair of the Energy and Public Utilities Committee

Senate Building

1 Capital Square  2nd Floor

Columbus, OH 43215

614-466-9737

 

And anybody else you can think of that will listen to us.  Don't just think your neighbor will do it.  We all need to make the call or write the letter to voice our concerns.  Don't let someone living in an apartment or development make decisions for us.  They might out number us but we own the land AND the mineral rights!  Thats why each of us must stand up for what is right! 

Permalink Reply by Dan on May 10, 2012 at 5:46pm

You pay less but you will still pay more in your energy consumption along with everyone else. The price will get bumped up and all will pay. The well owner bumps a penny more. Accounting and potential metering adds a half a penny. That 3 and 1/2 cents gets doubled when the buyer resales. The wholesaler sells to the distributor at 14 cents. The distributor sells to the retailer at 24 cents and we get screwed at close to a 1/2 dollar for every unit we buy because the state wants their 2 cents. Everybody is watching Governments hand that’s spending and can't see they are still sticking the other hand in the pie.

Severance tax = wealth redistribution that everybody pays for. The State and the energy companies down wind of the harvesting would benefit at every bodies expense.

Permalink Reply by Dan on May 10, 2012 at 6:14pm

Also Utica, 

Driller well owners that are invested down stream should directly profit from a severance tax with wider margains on processing and distrubuting, lets them have an edge to keep up with the money printing.  Add in speculators and the fact that when NG and other energy's prices adjust to even medium, cost to the consumer could drastically inflate.

 

Permalink Reply by Joseph-Ohio on May 10, 2012 at 12:15pm

Developing wells on Public Lands 1st puts the Private Landowner in line for well development AFTER the Public Lands.

Develop wells on Private Lands 1st.

Private Landowners need the money more than the government does.

All the government does is print more money into circulation when it nears the bottom of the barrel.

Witness the 'Bailouts' which we as well as our children and grandchildren etc. have to bear the burden of as inflation continues to make our dollars worth less.

Private Landowners don't have the luxury of simply printing more money when they don't have enough. 

No matter how you cut the baloney the taxpayer pays the freight.

Personally, I don't mind paying taxes as long as I'm making money.

It's when you're not making money that brings the grief.

Permalink Reply by Garfield on May 10, 2012 at 5:04pm

Joseph, I hope that I don't sound anti-tax.  I am certainly willing to pay my fair share.  In fact, part of my angst toward the severance tax plan (beyond the fairness issue) is that tax revenues generated locally should remain local.  Our local school district is really struggling, (as are surrounding districts), due in large part to the state slashing their revenue stream.  Local governments are also hurting, although I'm sure some degree of belt tightening is healthy.  At any rate, why should my community's oil and gas revenues be going into the pockets of taxpayers in Columbus, Toledo and Cincinnati ?  It's just not right.  As I said before, the state will already be getting a huge windfall based on taxing everyone's bonus payments and royalties as ordinary income.  Let them rebate that money.  Don't let them sweet talk us into creating a new 4% tax on top of the income tax so they can placate the "have-nots" in the western half of the state.

Permalink Reply by Joseph-Ohio on May 10, 2012 at 11:33pm

I don't want to sound pro-tax either - I don't like them - I also want them to be as low as possible - taxes are just a reality that I've lived with all my life - and I have to make money to pay them.

Bottom line with me is earning money (legally, and as much and as quickly as possible) so as to be able to pay mine and my family's way in this life.

I dislike delays in earning money more than I dislike having to pay taxes  - I can't afford to create delays in earning money - however, too many times delays occur anyway -  then I have to deal with them - I do all I can to avoid those delays - I've also noted however that there is seldom a delay in having to pay without having to pay more later.

It's just the way it is.

 

Permalink Reply by Garfield on May 11, 2012 at 5:56am

Below is an article reported by the AP today regarding Ohio's huge surplus tax revenue for fiscal 2011.  Surpluses in fiscal 2012 and beyond are likely to be far greater as O&G drilling gets rolling.  The state has more than enough revenue now to cut our taxes...  it makes no sense for the government to stockpile billions in a rainy day fund.  Let's return the people's money to the people!

 

Associated Press

COLUMBUS: Ohio’s auditor is urging lawmakers to put any surplus tax money into the state’s rainy day fund this year instead of spending it.

A boost from tax collections has put revenue about $350 million above estimates. Some forecasters believe that could grow by hundreds of millions of dollars before the fiscal year ends June 30.

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