Louisiana oil tax cut passes state House

In an attempt to revitalize the state’s oil industry, the state House has passed a bill to cut the oil severance tax rate by 4 percentage points. However, this could leave an $80 million gap in state revenue.

House Bill 259, now heading to the state senate, was sponsored by Rep. Beau Beaullieu of New Iberia, faced no pushback on the House floor, passing the chamber 86-13.

Currently, Louisiana taxes oil extracted from certain active wells at 12.5% of its value. In a years-long concerted effort to cut taxes on oil, HB 259 would gradually bring that rate to 8.5%, stepping it down by half a percentage point each year starting in 2025.

The 4% tax cut proposed in HB 259 would cost the state nearly $107 million in tax revenue over the next five years, according to the Legislative Fiscal Office. Invest in Louisiana, formerly the Louisiana Budget Project, estimates it will put the state short about $80 million in annual revenue once the rate reaches 8.5%.

Jan Moller, the head of Invest in Louisiana, has warned against the tax cut, especially as the state faces an anticipated half-billion-dollar budget shortfall after the 0.45-cent temporary sales tax rolls off next year.

But supporters of HB 259 argue lowering the tax will prompt renewed investment in the state’s oil industry in the form of increased oil extraction. A state economist told a House panel he doubted such impacts would offset more than 5% to 15% of the loss.

The budgetary debate also comes as the state is expected to face rising costs related to the slew of tough-on-crime measures lawmakers passed during the recent special session. Those measures will keep people convicted of crimes locked up longer in an effort to reverse 2017 criminal justice reforms.