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So Much Tax Money, So Many Ways to Spend It February 18, 2008

Posted by awatcher in Uncategorized.
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There is a gusher of tax money awaiting those who can figure out how to tap and spend it, and the environmentalists are working over time to lay claim to it.

We have written earlier about the severance tax and how it could grow to unimaginable sums of money if and when the oil companies figure out how to recover one million barrels of oil per acre from oil shale lands.

The environmentalist extremists have set their sights on that money and the power it would bring if only they could control it.  The Aspen Times reports:

Environmentalists introduced four ballot proposals Thursday to increase the taxes paid by the oil and gas industry as they seek to build support for a statewide campaign.

The move comes as state lawmakers and the governor are still considering whether to ask voters to increase the state’s severance tax this year.

The coalition, which includes Trout Unlimited, Environmental Defense, The Wilderness Society and others, wants to use the estimated $200 to $300 million the proposed hikes could generate to boost renewable energy, protect wildlife habitat and help communities impacted by the boom. Joe Neuhof, West Slope field director for the Colorado Environmental Coalition, said some coalition members have been involved in the Capitol discussions about whether to raise Colorado’s tax — the second-lowest in the West — but wanted to put forward their priorities for how the money should be spent as they continue to talk.

These people aren’t thinking small:

The four ballot proposals include different combinations of getting rid of the current tax exemption for small wells, adding an extra 3 percent tax for all oil and gas wells and setting a new 10 percent tax rate for wells that produce more than $300,000 a year. Some would also bar energy companies from deducting their property tax in calculating the severance tax they owe.

One of the more likely goals of imposing a 10% severance tax is to slow down or even stop oil and gas development in the state.  Oil shale recovery has been delayed in part because of technology, but also because the proposed technology is so expensive.  If the environmentalists could add an extra 10% to the costs of recovery, they might be able to make it impossible to recover oil shale economically until the price of a barrel of oil hit $150.

In addition, by putting a dollar threshold at which taxes begin to be collected, they can depress the production of working wells.   As the price of oil and gas inevitably rise, every well will hit that threshold, but the owners will want to curtail production to avoid the tax.

This just follows the usual pattern.  If there is to be a tax increase, wouldn’t it be better if the proceeds went to more normal government activities such as funding higher education, building prisons, or building and maintaining roads? 

Ritter Transportation Panel Calls for More Taxes January 7, 2008

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Another panel commissioned by Gov. Bill Ritter, another set of recommended tax increases:

Governor Bill Ritter’s 32-member blue-ribbon panel is recommending a $100 average increase in vehicle registration fees as part of its $1.5 billion plan to pay for much-needed transportation infrastructure maintenance and improvements.The road funding proposals include:

  • Increase vehicle registration fees by $100 on average.
  • Raise gas tax by 13 cents a gallon.
  • Icrease [sic] the fee on hotel rooms and car rentals to $6 a day.
  • Increasing the state sales tax by 0.35 percent.
  • Increase severance tax by 1.7 percent.

This is starting to sound like a tired theme. I don’t know about your middle-class family, but all these proposals alone would take a significant chunk out of my household budget. Is this what Coloradans voted for when they elected Ritter to be governor in 2006?

Cross posted at Ritter Watch

Imagine An Oil Gusher January 6, 2008

Posted by awatcher in Uncategorized.
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If one reads between the lines of a Durango Herald story, it is entirely possible that Colorado and Utah will be the beneficiaries of severance tax revenues beyond imagination if shale oil production comes on line.

The article talks about being able to produce one million barrels of oil per acre.  At today’s relatively low prices, that is $100 million dollars of production an acre.

In an effort to scoff at the level of production that can be reached, Randy Udall, Mark Udall’s brother seems to acknowledge that production could be 100,000 barrels a day.  Environmentalists always seem to grossly under estimate potential energy production, usually by a factor of 20, so assume 2 million barrels of oil a day.

Figure severance taxes to be somewhere in the neighborhood of $8 million a day and ramping up as the price of oil ramps up.

Does anyone really think that Colorado and the nation will not develop this oil?

A Tax Bill Ritter Doesn’t Like? December 11, 2007

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Colorado Confidential published a fluff piece on Rep. Kathleen Curry that contained the following:

“If I propose a severance tax hike and the measure gets on the ballot,” Curry said with a laugh. “I’ve been told the energy industry has set aside a $50 million advertising budget to fight it. I’ll admit the industry watches me pretty closely.”

Curry said Gov. Bill Ritter also has asked her to hold off on such a proposal, “but that’s about all I hear from my district,” she said. During one day, she counted two live interviews and four media calls, all about severance tax.

“I’m getting a lot of resistance on all levels to not forward a bill to increase the severance tax rate,” Curry said, shrugging, “but I have an obligation to my constituents.”

We would guess that he likes the tax increase but he wants to hold it off as an easy tax to pass compared to the inevitable taxes that his “blue ribbon” special interest panels will propose.  You know, a billion here, two there, and before long the state budget is doubled and businesses are leaving the state for a friendlier climate.

Selling Gold Watches in Colorado November 24, 2007

Posted by awatcher in Colorado Governor, Colorado Legislature.
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Holy Cow!  Some fool invited me to blog here, too.

“Gold watching” is an old tradition among those who allocate government funds.  It is a term for putting something that the taxpayer or tax consumer really wants below the funding line as a means of getting as many programs with less support as possible funded (above the line).

Anyone who has observed Colorado politicians in the past few years has seen gold watching being used against the taxpayer’s interest in the most classic way.  Ref C was supposed to be a timeout from TABOR to solve three problems.  Borrowing from a Mark Hillman – Amy Oliver study:

Voters were assured by Ref C proponents that K-12 education, colleges and universities, and health care would split the lion’s share of the resources if the measure passed…

However, a closer look at the state budget shows that the supposed beneficiaries have not benefited nearly as much as the  remainder of the state budget.  Since the 2005-06 budget, passed prior to Ref C, general fund spending has increased by $1 billion, or 16.1 percent. Spending on Ref C “targets”—K-12, higher ed and health care—has grown by just 11.9 percent, or $557 million. Meanwhile, the remainder of the general fund, which wasn’t targeted for a Ref C infusion, has grown by 28.7 percent, or $446 million.

Now that Bill Ritter and his band of merry taxaholics control the legislature, they have conveniently forgotten their promises to the public.  They know that the public wants more money spent on higher education, so they will ask for another, targeted tax increase, with the money to come out of individual taxpayer’s pockets.  They think that the public can be tricked into paying for the same gold watch (higher education) two or three times while they siphon huge sums for other less popular spending projects.

Another gold watch tactic is to use an unpopular tax source to fund less popular programs.  Sin taxes are traditional sources of revenue.  No non-smoker  likes smokers, and the more it costs to smoke, a voter might think, the fewer smokers there might be. 

It is very likely that the next “sin” tax target will be the oil and gas industry, specifically, severance taxes.  With Oil hovering around $100 a barrel and Natural Gas that is like to hit $10 per thousand, what voter wouldn’t be willing to see the state take some of that money and use it for … the voter will hardly care.

The Republicans have tried to head them off at the plateau by proposing that severance taxes go toward funding higher education.  This ploy recognizes two facts 1) higher severance taxes are likely to be approved by the voters and 2) the voters want a good higher ed program.  If the Republicans can direct that fire-hose of new government funding into higher ed, they might, just possibly, be able to slow the growth of government in other areas.

The Democrats are having none of this because it destroys their gold watch plans.  Care to bet that the four month delay in approving drilling on the Roan Plateau that Ken Salazar negotiated with BLM by holding a political appointee hostage was more about giving Democrats time to figure out how to use the severance taxes and still be able to gold watch education than it was about saving the plateau?

Since this isn’t my blog, (he he) I’ll make a rash prediction:  Before Bill Ritter leaves office, he will find a way to remove his objections to drilling on the Roan Plateau as long as the windfall (more like avalanche) in new money goes to his own projects, none of which will be higher education.  Taxpayers will be asked to fund Higher Ed by digging deeper into their own pockets – again!

Note:  This is the first time I’ve used this blogging software, so I have no idea about what I will get or if I can edit it.  Have patience.

I am, as always, a watcher, though here, I might be “awatcher”