Oil taxes fuel state budget

Oil taxes fuel state budget

oil's well that ends wellThe group Californians Against Fracking seeks to eliminate oil and gas drilling by hydraulic fracturing methods, called “fracking,” statewide in California.

A post-election article by David Atkins in the Washington Monthly, and cross-posted on the CAF website, lamented the defeat of Measure P in Santa Barbara, which would have banned fracking in that city. He blamed “the political mendacity of the oil companies,” who funded the opposition campaign.

But there likely was more at work. Banning fracking could lead to higher costs at the pump for drivers. And it could add to state and local budget problems.

A 2014 study conducted by the Los Angeles County Economic Development Corporation cast doubts about whether a fracking ban could gain a trickle of support. Not just commuters with large gas bills would oppose it. So would those depending on checks and programs funded by state and local revenues.

The study found that, in 2012, state and local oil-and-gas-tax revenues were $21.55 billion.

But U.S. Census Bureau data show combined state-and-local revenues for that year tallied $250.88 billion. So the oil-and-gas taxes equaled 8.6 percent of total state-and-local revenues.

State government is 82 percent dependent on income and sales taxes. And local governments are dependent on 73.4 percent of their tax revenues from property taxes, according to the California Budget Project.

But oil and gas tax revenues generate both income and sales taxes to the state, and property taxes to local governments, as shown in table below. Additionally, California’s operating budget shares its revenues with local governments.

                               Fiscal Contribution of Oil and Gas Industry in California

Type of Tax State and Local         ($ billions) Federal ($ billions) Total Tax Revenues  ($ billion)
Sales and excise taxes $14.65 $4.03 $18.68
Property taxes $3.76 —— $3.76
Personal income taxes $1.06 $3.0 $4.06
Corporate profits taxes $0.990 ($990 million) $4.15 $5.14
All other taxes $1.1 $3,81 $4.91
TOTAL TAX REVENUES $21.55 $14.99 $36.54
Source: Oil and Gas in California: The Industry and Its Economic Contribution in 2012, Los Angeles County Economic Development Corporation, page 1.

Federal taxes

The oil and gas industry in California generates $21.55 billion in taxes for state and local governments and $14.99 billion in federal taxes. Total: $36.54 billion.

And let’s remember that federal taxes don’t stay in Washington, D.C., but mostly flow back to the states. Reportedly, California got $1.09 back from the federal government for every $1 in federal taxes paid in 2012.

So even those federal oil tax dollars basically come back here one way or another.

468,000 Jobs

California’s oil and gas industry reflects 468,000 direct and indirect induced jobs in California, adding $48 billion in total labor income in 2012, according to the LACEDC report.

Los Angeles County captured 103,862, or 22.2 percent, of those jobs (see Exhibit 4-1 on p. 18 of the LACEDC study), even though Southern California comprised only 8.6 percent of all active oil wells in the state (see Exhibit 3-2 on p. 12). Los Angeles County’s higher percentage of oil and gas industry jobs is attributed to having more than half of the state’s oil-refining capacity.

Put into perspective, the oil and gas industry directly or indirectly employs about the same number of people statewide as the 469,428 population of the entire city of Long Beach.

California’s Central Valley and Northern California have 84.2 percent of all the active oil wells in the state; of which Kern County has 78 percent of all active wells and 63 percent of all gas production in the state (LACEDC study, p. 12).

Fracking is a key to continuing prosperity for the state’s oil industry, including for its middle-class industrial jobs.

49 Percent of Californians Oppose Oil Extraction Tax

There isn’t a statewide survey on opinions over banning fracking. But there is something similar.

A Dec. 2014 public opinion poll conducted by the Public Policy Institute of California reported 49 percent of Californians oppose an oil-extraction tax, with 45 percent in favor. Independent voters, an increasingly large chunk of voters, opposed to the tax by 49 percent.

For the parties, 58 percent of Democrats support an oil-extraction tax, while only 34 percent of Republicans favor it.

Voters with a household income of $80,000 per year backed the tax at a higher rate (58 percent) than those with income less than $40,000 per year (42 percent). That might reflect how low-income voters often have to commute long distances to work.

And of course, the numbers don’t reflect a statewide media campaign, like the one conducted this year in Santa Barbara over fracking, that the oil companies would lead against an oil-extraction tax increase that made it to the ballot.

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