Rep. Clyde: Severance Tax Plan Just Another Tax Shift
Income tax cuts targeting the wealthy shortchange meaningful community investment

State Rep. Kathleen Clyde (D-Kent) on Wednesday voted against House Bill 375, legislation that increases the tax rate on oil and gas drilling to largely pay for an income tax cut in Ohio. 

“Using a severance tax to pay for an income tax cut for the wealthiest Ohioans is more misguided GOP policy-making that hurts middle class families,” said Rep. Clyde. “The rate should be higher, and the revenue should be directed to help our local communities where the oil and gas is coming from to pay for our roads and aging infrastructure.”

House Republicans’ plan to alter Ohio’s severance tax to 2.5 percent would establish Ohio as the only state in the country to require oil and gas revenue—which is predominantly generated in rural and Appalachian working-class communities—to pay for an income tax cut that disproportionately favors Ohio’s wealthiest citizens. 

A review of oil and gas taxation policies across thirty-five states that levy a tax or fee on drilling production shows that no state uses any amount of oil or gas revenue to pay for any level of income tax reduction.

Under the GOP plan, the first $21 million of revenue raised by the tax on oil and gas drilling will go to the Ohio Department of Natural Resources for drilling regulations, like capping orphan wells. Of the remaining funds, 82.5 percent will go toward income tax cuts targeting the wealthiest Ohioans, while some 17.5 percent will go to local governments. The plan also includes a tax break for big oil companies by authorizing a driller to deduct the first $10 million in receipts from oil and gas severed at a horizontal well.

Democrats tried to change the focus of the bill eight times on the House floor, offering amendments to use the revenue to return the majority of the money to affected communities, reduce the recent sales tax hike and to raise the severance tax rate by one to five percent. GOP lawmakers blocked the proposals from formal consideration by the House.

“New revenue sources should be well thought out, and should be directed to replace Governor Kasich’s harmful cuts to Ohio’s public schools and local communities,” said Rep. Clyde. “This bill falls far short.”

The bill passed by a vote of 55 to 35. It now goes to the Ohio Senate for further consideration.

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