Ohio Gov. John Kasich talks tough on oil and gas tax hike

by MARC KOVAC | CAPITAL BUREAU CHIEF Published:

This is Part II of a three-part series.

Columbus -- Gov. John Kasich isn't hiding his frustration with energy companies and efforts to block a proposed tax increase on oil and gas production in eastern Ohio's shale deposits.

Lawmakers balked during the past session at Kasich's plan to increase the state's severance tax rate, using the proceeds to implement a corresponding decrease in Ohio's income tax rates.

The plan will be included in a larger tax reform package Kasich will offer in the new year.

"… Modernizing the severance tax keeps us as the lowest severance tax state in the country," Kasich said. "There is no danger that people are running away. Since we've been talking about this, they've continued to invest billions."

He added, "I think there's an apprehension, if you put this on, are you going to drive somebody away? Are you kidding me? … I've done some foreign travel, down to Houston, and every single time I meet with the industry privately, you know what they say? We should take this and run. But then they get their lobbyists and all these other people and they obscure the issue."

And Kasich is confident a severance tax increase will be OK'd by the legislature next year.

"Whatever that tax is, we want that tax to make sure that we are not penalizing companies for doing business in Ohio," said Senate President Tom Niehaus, a Republican from New Richmond. "We want to incentivize companies for doing business in Ohio. We don't want them moving their rigs to Pennsylvania or North Dakota. We want them here, we want them hiring Ohio workers and we want them here a long time."

Modernized

Severance Tax

Kasich said he will roll out a tax reform package in the new year that will include his proposed increase in taxes on oil and gas production.

"I'm very optimistic we can see a significant lowering of that income tax that I think would help us grow even faster," he said. "I constantly talk to CEOs -- not just CEOs that are coming in but ones that I'm trying to start getting into a relationship with. And the idea that there will be a lower income tax in Ohio appeals to all of them. ... This income tax will be focused on helping small businesses to grow and giving them the kind of relief that they need …

"Let me make one thing clear. This is about depleting resources in our state. This is about people that take out of the state, and it's not like the severance tax is a new idea. It's been in place forever … What this is really is a modernization of it to reflect the real value of what we have here in the state."

He added, "This income tax is too darn high. People say we already lowered it and it didn't do any good. Yeah, it's done good -- we've got 127,000 jobs, including a more friendly business climate. This tax, at 5.9 percent, is too high, and a comprehensive tax reform program, which we will have for you in February, is going to present the legislature with the option to lower that tax on small business. They're the ones that create the jobs. Nobody's talking about an 8 percent severance tax, except for somebody that might end up putting it on the ballot. We're talking about something that's reasonable. We've worked with this industry. But in regards to this industry, I'm now governor, but the day will come when I won't be governor. And you're going to want to come to my first speech."

Lawmaker Reaction

The outgoing head of the Ohio Senate and the ongoing leader of the Ohio House both voiced support for the governor's severance tax plan.

"Yes, I do expect it will get done in 2013," Niehaus said. "I was working very closely with the governor and the industry on the issue of severance tax. While I'm disappointed that we did not get to a conclusion, I am confident that we will get there in 2013. The governor's already talked about the comprehensive tax reform, and anytime you're talking about a significant change in taxes …you want to make sure whatever you do with one industry, how that fits in with everything else that's changing."

Republican House Speaker Bill Batchelder, from Medina, said he didn't think there was "any question we ultimately will support it. I think that we have a number of questions … I certainly want to make sure that what we're going to see in that area is the kind of growth that will provide jobs in Ohio, that will bring corporate headquarters here. We have a number of important companies who have started work here, but we have some other ones that are sort of in and out … Seems to me that at this point, looking at other taxes as we are going to do, I think we want to be very careful before we impose that. Will our caucus vote for it? I think that they will, I don't think there's any question about it. The problem in our caucus and with me is simply I'm not sure about the timing, and I think that's crucial."

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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