Poll of the week: The severance tax

Should the severance tax in Arkansas be raised?

Yes, at least to the regional average. We're giving away the store. Only if it is needed in order to cut the other half of the grocery tax The state should tax natural gas at market value like other states rather than by volume. No. Raising taxes only inhibits economic development. view results

Much has been made recently of the state's severance tax, at least as it pertains to natural gas (codified at Ark. Code Ann. § 26-58-111). At three-tenths of 1 cent per 1,000 cubic feet (MCF), Arkansas has one of the lowest severance tax rates in the country for natural gas. Texas has a severance tax 200 times the level of ours, and Louisiana's is nine times higher than ours. Over 50% of Alaska's total state tax collections comes from its severance tax. Also, Arkansas taxes the volume of natural gas extracted, whereas most other states, particularly the larger gas-producing states, base their severance tax on the market value of gas extracted. However, some low- and non-producing states, including Pennsylvania and New York, do not levy a severance tax on gas or minerals at all.

Proponents of an increased tax suggest that the non-renewable resources being extracted in the Fayetteville Shale can never be replaced, and for that reason, the state should get a revenue boost from the increased activity. Opponents believe an increased tax may drive potential business and precious jobs away, and will only be passed on to the consumer anyway. Unless an initiated act is successful, it would take a 3/4 vote of both chambers to raise the severance tax.

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