Regarding Dan Dickinson’s Compass piece, “Oil Producers seek favorable tax climate in
I agree with his title. It is common for businesses to be deceptive about prices to motivate a sale. That is what has happened with SB 21. I think the Legislature deceived Mr. Dickenson, too. To the announced 35 percent flat tax the Legislature added a sliding-scale credit. The purpose of the credit is to make it reasonably certain that no company will pay a 35 percent rate at forecast oil prices.
Under ACES, credits are given for investments the petroleum companies make. Under SB 21, the credit is a mathematical method of reshaping the flat tax so it is not flat. When you deduct the sliding scale credit ($3.21) from the 35 percent announced tax ($3.50 for a tax value of $10/bbl), the tax is 29 cents per barrel. But the minimum tax on a $10 bbl is $1.60, so under SB 21 the tax is $1.60. I am assuming a production cost of $30.05/bbl.
Please correct me if I am wrong.
— John Beebee