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Forum editorial: Carlson's oil tax idea has merit

There's not much of an appetite among North Dakota lawmakers to lower the state's oil taxes. The bipartisan sentiment to leave the tax structure as it is was reflected in the fact that only a single oil tax bill was introduced this session, and i...

There's not much of an appetite among North Dakota lawmakers to lower the state's oil taxes. The bipartisan sentiment to leave the tax structure as it is was reflected in the fact that only a single oil tax bill was introduced this session, and it was easily defeated. The privately financed "Fix the Tax" campaign led by former Gov. Ed Schafer has received an icy reception in nearly every corner of the state.

That being said, an oil tax change advanced last week by House Majority Leader Al Carlson, R-Fargo, is worth a careful look. His adjustments to the oil extraction tax would be tied to production levels in the future. Moreover, Carlson says his changes would not reduce projected oil tax revenues and likely would result in increasing revenues as oil production ramped up.

The strength of the majority leader's idea is its link to production as measured by barrels of crude oil per day. It's nothing close to an immediate oil tax cut. Oil production would have to double before the tax was lowered from its current 11.5 percent to the limit of 9 percent under the legislation. Decreases in the tax would be incremental, also tied to production. For example, when production reached 425,000 barrels per day and held at that level or higher for three months, the tax would drop 0.5 percentage points. Subsequent production jumps would result in similar tax cuts, until the tax dropped to 9 percent at the 700,000-barrel level, sustained for three months.

At first glance - and it might be the devil is in the details - Carlson's oil tax proposal looks fiscally sound and politically palatable. But his amendment is a late addition to the oil tax debate, and as such, should be subject to a hearing. If the proposal gains support among lawmakers, it has a better chance of passing, even in a Legislature that has been cool to fiddling with the oil tax.

It should also be emphasized that legislative leadership does itself no good by using amendments and/or late bills to ram through legislation that could have long-term effects on state revenues. A full-blown hearing at which advocates and opponents can speak up - and the detailed provisions of the amendment can be aired, challenged and questioned - is essential in the oil tax matter.

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Forum editorials represent the opinion of Forum management and the newspaper's Editorial Board.

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