Energy plan aims to lower income taxes

3/6/2012

COLUMBUS — Gov. John Kasich plans to unveil an energy policy this week that could deliver a personal income-tax cut by taxing certain resources extracted through a new form of oil and gas drilling, according to published reports.

Public documents indicate Mr. Kasich’s plan also makes changes to various existing petroleum taxes and gives a tax break to some smaller operators, the (Cleveland) Plain Dealer reports.

The newspaper said the new tax structure could bring $666 million to $1 billion to the state over five years, based on current market prices.

“We want to lower income taxes to help out all Ohioans and to especially help out small businesses because they’re so important to Ohio’s economy,” said Mr. Kasich, who pledged during his 2010 campaign to phase out the state’s personal income tax.

His proposal, which would need legislative approval, would tax natural gas liquids extracted from the Marcellus and Utica shale formations below the state. That butane, ethane, and propane is reached through hydraulic fracturing.

The drilling technique referred to as “fracking” involves blasting chemical-laced water deep into the earth to create fractures and free the gas.

The oil and gas industry opposes the new tax, saying it brings revenue to the state through new jobs and various other taxes, and that the tax could drive away companies considering Ohio as a site for drilling.

“We applaud the idea of reducing the state income tax,” Tom Stewart, executive vice president of the Ohio Oil and Gas Association, told the Columbus Dispatch. “We question whether one industry should be asked to pick up the slack.”

The new tax would be 1.5 percent of gross sales in the first year and 4 percent in following years, the Plain Dealer reports. About $17 million a year would go toward costs of regulating the industry.

The income tax would come into play with revenue growth of at least one-third of 1 percent. The administration projects the first income tax cuts would occur in 2013.

The new tax would be offset by the reduction in income taxes, for a “revenue neutral” effect, with money shifting to Ohio residents, said Scott Milburn, a spokesman for the governor.

But Ohio House Speaker William Batchelder (R., Medina) has expressed concern over the plan, said spokesman Mike Dittoe.

“The governor and the speaker and the Senate president have been speaking rightfully all year about ways to balance the budget without raising taxes and any form of a tax increase would most likely be a concern to the speaker and most members of the House Republican caucus,” Mr. Dittoe said.

House Democrats Robert Hagan of Youngstown and Mike Foley of Cleveland last week introduced a bill calling for a 7 percent tax on oil and natural gas extracted through hydraulic fracturing.

The state currently asks for “a pittance,” Mr. Hagan said.