In the New York Times bestseller, Wealth of States, former Reagan White House economist Dr. Arthur Laffer and his fellow authors make the case that oil production per capita is “by far the most significant variable” impacting a state’s economic growth.
This should be good news for Oklahoma, where oil and natural gas production now ranks as the state’s leading private-sector industry, according to the U.S. Bureau of Economic Analysis.
Oklahoma’s 2014 legislative session centered around a variety of issues, including whether to raise the state’s gross production tax rate on oil and gas drilling. Tax consumers and big-government advocates pushed to increase the tax by as much as 600 percent.
Ultimately, a compromise set a 2-percent tax rate on all new wells for the first three years of production. This new tax structure was locked in permanently, providing producers more certainty to allocate capital in Oklahoma.
Throughout session, much debate was given to whether energy producers were contributing their “fair share” to Oklahoma’s economy and state tax collections.
Now, new research from scholars at Oklahoma City University provides additional evidence that, in fact, Oklahoma’s energy producers are doing much to drive the state’s economy and its jobs climate.
These findings suggest Oklahoma’s oil and natural gas industry represents one in five jobs in the state, as well as $1 out of every $3 in gross state product. Average annual pay in the industry was about $94,500, and each industry employee added roughly $197,000 to Oklahoma’s economic output.
All this activity has helped produce record-high total tax collections for Oklahoma’s state government. As Michael Carnuccio, Oklahoma Council of Public Affairs president, points out, gross production taxes from oil and gas drilling in Fiscal Year 2014 accounted for $665.4 million of this revenue record.
Still, many Oklahomans remember past busts in the state’s drilling sector and are careful not to take high times for granted. As a recent editorial in The Oklahoman reminds us, this is all the more reason to keep a low a tax burden on the private-sector job creators and entrepreneurs driving the current growth in Oklahoma’s energy industry.
As Oklahoma competes with other states for jobs and economic opportunity for its citizens, the policies it adopts toward drilling are key. Reports that New Mexico has passed Oklahoma as the fifth-richest oil state in the country are yet another reminder that the interstate competition never stops.