A Louisiana lawmaker has proposed a constitutional amendment to allow parish governments to keep a larger share of oil and gas taxes.
House Bill 278, sponsored by Rep. Jack McFarland, R-Winnfield, would apply to severance taxes on all natural resources other than sulfur, lignite or timber. It proposes that parish governments get to keep the lesser of either $2.85 million or the aforementioned tax revenue.
Severance taxes are levied on natural resources when they are taken from the earth. Oil and gas collections account for almost 92% of all severance tax collections in Louisiana, according to the state Department of Natural Resources.
The bill proposes that the $2.85 million limit shall be adjusted annually for inflation according to the average annual increase in the Consumer Price Index.
Currently, the Louisiana Constitution allows parishes to keep a maximum of roughly $1.14 million in severance taxes and allows annual inflation adjustments. Current law also has triggers that could potentially increase the amount to $2.85 million if revenue forecasts reach a certain threshold. McFarland’s bill would repeal those triggers.
“When all these severance taxes were passed, the original intent was to help with roads, bridges and schools,” McFarland said in a phone interview. “Over the years, the state started depending on the revenue.”
McFarland’s proposal would also require parish governments to use 100% of any excess severance tax remittances on transportation and infrastructure projects, up from the current 50% requirement. The bill defines excess remittances as any amounts greater than the amount in the 2022-23 fiscal year.
“To me, it’s a tradeoff,” he said. “The more severance tax parishes can keep, the less money we have to give to them in capital outlay for roads and bridges.”
Louisiana collected about $302 million in severance taxes during the fiscal year that ended June 2021. McFarland said the state forgoes a lot of oil and gas revenue because it suspends the severance taxes on the first two years of a well’s life, which are the most productive years.
As a constitutional amendment, the bill faces a difficult journey to enactment. It must receive a two-thirds vote in both chambers of the legislature and then receive voter approval in the fall election.
GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.