There is a better way to tax Louisiana

Dear Gov. Bobby Jindal: I commend you for calling for the repeal of the state income tax.

As you may recall, eliminating it was the theme of my campaign for governor in 2007. In our debates during that election, you didn’t say much about it, but evidently now you agree that the most prosperous states do not tax income.

We also agree on Louisiana’s nearly 100-yearold severance tax on oil and gas: It should be repealed as well. There are better ways to fund state government than collecting an extremely high tax of 12-1/2 percent of value on oil produced in Louisiana.

With our Haynesville Gas Shale in the north and Tuscaloosa Oil Shale in the south, Louisiana’s homegrown oil and gas industry would thrive if it were relieved of paying high severance taxes that date back to 1921.

Unfortunately, doing away with income and severance taxes creates a $4 billion hole in the state budget, and you have promised to make your tax proposal “revenue-neutral.”

Where we differ is on your plan to make up the lost revenue. You would raise sales taxes to the highest rate in the United States – to a rate rarely, if ever, seen by any state; a rate as high as 16 percent by some estimates, if you include local taxes.

I would not put that crushing burden on the people of Louisiana, nor would I put at risk our retail and tourism economies with such a questionable move. There is a better way. A 4 percent tax on all the oil and gas processed in Louisiana, including the enormous quantities brought into our state from offshore wells and foreign countries, would raise $4 billion a year. A hydrocarbon processing tax would acknowledge Louisiana’s decades-long transition from producer of oil and gas to primarily a processor, an evolution that has lowered severance tax revenues and made the tax outdated.

The processing tax would be a growth tax on an industry making billions of dollars in pro t, rather than the shrinking severance tax that unfairly targets only in-state producers.

There’s more benefit as well. A processing tax would, for the first time ever, obtain income for the state from an offshore oil industry that is responsible for easily half the destruction of our coastal wetlands.

The best part of this plan is that since the severance tax is in the state constitution, replacing it with a processing tax on oil and gas would require a vote of the people.

I am happy to put this plan to a popular vote. Can you say the same about yours?

I can already hear the major oil companies saying they will “leave Louisiana” if we tax oil and gas processing.

Isn’t it time we admit the obvious?

The oil companies aren’t about to leave Louisiana. We have what they want – oil and gas product and the infrastructure to process it.

Gulf of Mexico production is already back to its pre-BP-spill levels and expanding. Oil wells off our coast are making hundreds of thousands of barrels a day. The Haynesville and Tuscaloosa shale formations hold vast sums of oil and gas hydrocarbons.

Louisiana has 50,000 miles of pipelines, a host of large oil refineries and an experienced and skilled workforce. We also have the Mississippi River to ship product in and out.

Oil companies aren’t leaving but people are as shown by the stagnation of our population and loss of a congressional district. If you saddle Louisiana working people with a 16 percent sales tax, the outmigration will only get worse. You are right to propose elimination of income and severance taxes. But your focus on higher sales taxes favors the wealthy, hurts the middle class and working people, and threatens to harm retail and tourism businesses. You can meet your goals and balance the budget without creating new problems of inequality. It will take courage to confront major oil companies that are politically powerful.

But the potential reward is great: a stable tax base; proper support for education, health care and other public services; and a strengthened economy.

With its tremendous assets, Louisiana should be the most progressive state in the South. Instead, we are competing with Mississippi for last place.

The correct tax policy is the key to our progress in this new era.

Foster Campbell of Elm Grove is the North Louisiana representative on the Public Service Commission. He served in the Louisiana Senate from 1976 to 2002. He can be reached at 676-7464 or foster.campbell@la.gov.