It’s Not about Taxes; It’s about Quality of Life

This is not the first time that energy development has blitzed the Rockies. In the euphoria, we’ve forgotten certain fundamentals of the energy economy. This is a three-part examination of those fundamentals, and how to deal with them. Part one can be found here.So, to review: A boom is always followed by a bust. There are those who would argue that Colorado should simply take the money from the oil boom, sacrifice a few communities and some of the environment on the altar of a budget surplus.

The second fundamental is that the issue is not severance taxes. As I said in part one, I’ve written all these stories before, 25 years ago. In our parade of stories about the energy boom in the 70s and 80s, we wrote a lot about taxes. Wyoming’s effective tax rate on coal at the time – including severance taxes, ad valorem taxes and so on — was about 22 percent, which is a lot, if you’re keeping score at home. Montana taxed it only slightly less. This extravagant cash grab did not discourage production, despite the pitiable cries of the coal companies that the state was squashing corporate initiative and hindering the nation’s quest for energy independence.

By raising the severance taxes, this argument goes, we can prepare for a rainy day. Just look at Wyoming, at how much money they’ve saved up. Look at how much good the energy economy has done them.

Wyoming is not a better place to live now than it was in the 1970s, and in some ways it’s worse:

Wyoming dutifully put a lot of oil, gas and coal severance-tax money into a permanent mineral trust fund – which in 2006 totaled about $2.5 billion — “for the benefit of future generations.” Those future generations are here now. What have they gotten?

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Dan Whipple

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