Oklahoma Senate Adds Oil And Gas Tax, Pushes Through Bipartisan Budget Deal

Nov 6, 2017

In the ongoing budget saga at the Oklahoma State Capitol, there was some bipartisan movement on Monday in the state Senate. Lawmakers have already agreed to increase the cigarette tax and fuel taxes, but the sticking point has been the gross production tax on oil and gas wells.

Last week, the House of Representatives passed a bill that would decrease the tax discounts on oil and gas wells after failing to come to another agreement. That bill only required a simple majority (51 percent) of lawmakers to vote in favor.

But on Monday, the Senate came together in bipartisan support of a bill that, in addition to raising taxes of cigarettes, tobacco, fuel and low-point beer, raises taxes on all wells. It's a much more difficult vote to pass because it requires 75 percent of lawmakers to vote in favor. It passed that hurdle, with a final tally of 37 to 5.

If adopted by the House and signed into law by Governor Mary Fallin, the amended bill would:

  • raise the gross production tax incentive rate from 2 to 4 percent on all new wells
  • add a $1.50 per pack tax on cigarettes tax little cigars as cigarettes
  • add new taxes on chewing tobacco, smokeless tobacco and snuff
  • raise gas and diesel taxes by $0.06 per gallon
  • apply the 13.5 percent mixed beverage tax to low-point beer

Senate President Pro Tem Mike Schulz acknowledged that raising taxes is a tough vote, especially because they are afraid that raising the oil and gas taxes might affect jobs in the state.

"This is one of the most difficult agonizing votes you’ll cast in your Senate career."

Earlier in the day, House Speaker Charles McCall placed blame on the state Senate, saying they were holding up House budget bills.

The bill now heads back to the House of Representatives. Fallin is calling on them to put the bill up for a vote, in part due to Moody’s Investors Service issuing the state a “credit negative” warning earlier in the day.

"The Legislature's inability to pass a permanent solution to our budget challenge has resulted in Moody’s, one of the nation’s top rating agencies, giving Oklahoma a 'credit negative' outlook, which will hurt investment by businesses that are considering to expand in or move to our state."

If the bill passes, it will mostly fill the $215 million budget gap state agencies are facing, raising an estimated $183.8 million this fiscal year and $442.6 million next fiscal year. It will also provide ongoing revenue for a $3,000 teacher pay raise, a $1,000 state employee pay raise and the restoration of the earned income tax credit.

Today marked the start of the seventh week of the special legislative session. To date, only one bill has passed out of both chambers of the legislature. Fallin confirmed today that she has signed that bill.