The annals of fiscal irresponsibility in the Legislature are very long, but rarely has bad judgment been demonstrated so forcefully in the very first week of a session.
Lawmakers need to wise up, fast.
House Bill 506 by state Rep. Phillip DeVillier, R-Eunice, would cut severance taxes on oil and gas wells, resulting in an ultimate loss of $150 million or so over the next five years. It was passed out of the Ways and Means Committee on a 14-3 vote.
Just down the hall, the Appropriations Committee was being told that state revenues would likely take an enormous hit from the coronavirus shutdown, with more people filing for unemployment than even after Hurricane Katrina in 2005.
The circular argument is that oil prices collapsed, so the industry — heavily tax-favored in other ways — needs relief, and because prices are so low, the loss in projected revenue won’t be as much as expected, anyway.
Perhaps legislators are just that short-sighted, or perhaps they’re all influenced by oil and gas lobbyists’ extensive contributions to their campaigns. Or perhaps they look at their counterparts in Washington, D.C., lavishing money on people and businesses, and just don’t get the fact that the federal budget does not need to be in balance, like Louisiana’s is required to be.
Either way, bad call by the committee. It is headed by an able senior legislator, Stuart Bishop of Lafayette, and it’s dismaying to find that he would not put the brakes on such an irresponsible bill.
We are not opposed in principle to lowering the severance tax rate. Ours is higher than other oil states, but the experts agree that state tax structures vary so widely that it’s a hard argument to make. Right now, oil and gas is among the industries getting some help, with the state deferring payment of severance taxes in light of the oil price collapse.
This bill is unlikely to keep a single well open in these circumstances. The cut is phased-in but who on the committee can tell us what oil prices will be in, say, 2023?
Making the cut permanent over five years is either based on a belief that oil prices will never come back — we don’t agree, although it may take a while — or an ideological belief that tax cuts are the solution to every problem, every time.
The late President George H.W. Bush called that voodoo economics. DeVillier’s bill should not become law before thorough and objective study of the tax code is done, and more urgently, before we know what the oil price picture will be like in a matter of months.
It’s a bad sign that Ways and Means thinks so little of preserving state government’s tax base. An influential industry cherry-picks a somewhat plausible tax to cut and members wave it through? Irresponsible, from the get-go.