If state level statutes are amended to lower excise taxes, will non-renewable resource production be affected? This paper analyzes this question empirically using county-level panel data for the state of Wyoming's oil, gas, and coal industries. Results are consistent with prior research that posits an inelastic relationship between changing effective tax rates and non-renewable resource production. Changing Wyoming excise tax laws, in the form of tax rate reductions, greatly reduces state revenue, but adds a little by way of new oil, gas, and coal production.
The
State of Wyoming and its constituents benefit from energy
production in the form of employment and tax revenue. The
general fund for 2005 (Figure 1) reported that the total sales
and use tax collections accounted for 43.6% of the total revenue
of the State of Wyoming. Nearly 13.5% of the total sales and
use tax revenue came directly from the mining industry of
Wyoming in 2005. Ad valorem and severance taxes accounted
for 29% and 31% respectively for 2001-2005, while federal
royalties paid out 32% of mineral income in Wyoming during
that five-year period (Figure 2). Sales and use taxes tied
with state royalty tax at 4% each for the total mineral income
from 2001-2005 (Wyoming Department of Administration and Information,
Division Economic Analysis, 2005). Much of the previous research
deals with severance tax and royalty rate changes. Sales and
use tax contributions to total mineral income are comparable
to state royalty tax contributions over the years. Citizens,
officials, and industry producers tend to overlook the significance
of sales and use tax in the mineral industry, especially in
recent years.
Production
taxes from the energy sector, particularly oil, gas, and coal,
have contributed to the budget surplus in the energy producing
state of Wyoming since fiscal year 2001 (LSO Research Staff,
2005). In the past 30 years, higher oil prices were followed
by recessions in 1973, 1981, 1990, and 2000. Wellhead prices,
(in 2004 real price) were $16.24 per barrel in 1970. By 1975,
oil prices were up to $45.65 per barrel, and up even higher
in 1980 to $78.02. It came down to $46 per barrel in 1985,
and down even further in 1990 and 1995 to $40.28 and $24.12
respectively. By 2000, the price per barrel was on the rise
again to $29.10. Price per barrel has continually increased,
as it reached as high as $72 per barrel in 2006 (Global Financial
Data, 2004). These historical US and world events in the 1970s,
and continuing even today, set this large revenue stream into
overdrive for both energy producers and tax collectors. |
