Thursday, May 30, 2024

Senate committee trims House-passed oil tax break

by BIZ Magazine

By David Jacobs | The Center Square

A Louisiana Senate committee on Wednesday trimmed a House-passed tax break for the oil-and-gas industry, hoping to balance economic benefit with state government needs.

In its original form, House Bill 29 by Rep. Phillip DeVillier, a Eunice Republican, called for a severance tax exemption for new or re-worked wells for 24 months or until the investment cost is paid off, whichever comes first. DeVillier said it would put service companies back to work at a time when oil prices are low.

“This is a time to stimulate our economy,” DeVillier said.

The Legislative Fiscal Office estimates the tax break could subtract $157 million over five years from state coffers, a number DeVillier disputes. He argued the exemption would spur activity that wouldn’t happen otherwise, leading to a positive return from increased sales and income taxes.

Fiscal Office economist Greg Albrecht said Louisiana, because it cannot legally spend more money than it takes in, cannot really stimulate the whole economy; it can only stimulate certain aspects of the economy at the expense of other needs. As part of his analysis of HB 29, Albrecht looked at the baseline of oil and gas activity and concluded most of the benefit would go to work already taking place, he said.

Sen. Bret Allain, the Republican who chairs the Revenue and Fiscal Affairs Committee, successfully amended the bill so that it would apply to only abandoned “orphan” wells. Allain reasoned that the change would lower the cost to the state, potentially take liabilities off of government’s hands, and create more work for service companies.

HB 29 now goes to the full Senate. If it passes there, lawmakers would need to resolve differences between the two versions and vote again. So there will be opportunities to “massage it further,” DeVillier noted.

In other action, the committee advanced:

House Bill 20: Would provide a tax break for families who hired someone to facilitate online learning. While the Fiscal Office was unable to estimate how many people might claim the break, the bill’s author, Baton Rouge Republican Rep. Rick Edmonds, said it would be worth about $100 to $200 per family.

House Bill 26: Would establish a state sales tax holiday on Nov. 20 and 21 for 2020 only. The Legislative Fiscal Office says shoppers would save a total about $4.5 million, money that otherwise would go into the state general fund.

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