Budget & Tax , Education

Jonathan Small & Dave Bond | May 13, 2014

Myths and facts: Will raising Oklahoma’s gross production tax by 600 percent provide $250 million more for schools? Not likely

Jonathan Small & Dave Bond

[Advocates for raising Oklahoma’s gross production tax from the current 1 percent rate to 7 percent on horizontal and deep-well drilling for oil and natural gas have made questionable claims about the nature of the tax, the effects of energy drilling on Oklahoma’s economy, and the relationship between taxes on drilling and funding state government. This is the second in a series of posts in which we present the facts.]

Myth: If Oklahoma’s gross production tax rate on horizontal and deep-well drilling for oil and natural gas is increased from 1 percent to 7 percent, Oklahoma schoolchildren will benefit from more than $250 million in additional public education spending.

Facts: From Fiscal Year 1998 through Fiscal Year 2011, district administration in Oklahoma public schools increased by 49 percent, while student enrollment increased only 6 percent, according to data from the National Center for Education Statistics. As this trend continues, Oklahomans can expect that a large percentage of additional funding for education will be siphoned off by school district administrators before it reaches the classroom. Plus, whenever overall tax collections increase, public education is only one of many tax consumers demanding a slice of the pie. In recent years, total annual state government spending on health care in Oklahoma has finally exceeded total annual state government spending for Oklahoma education, according to data from the state’s budget office.

Additional data suggest raising tax rates on oil and gas drilling in Oklahoma by 600 percent could actually result in less tax collections, not more, as producers shift future drilling activity to other parts of the continent where they can achieve a greater return on investment.

Those advocating for a major tax increase on oil and gas drilling in the state are making two dangerous assumptions. First, they assume energy producers will submit themselves to the higher tax rate, even though capital is more mobile in the twenty-first century than ever before. Second, they apparently assume that all additional tax collections that might come in due to a rate increase would be directed straight to Oklahoma schoolrooms. This is wildly dismissive of past experience.

As well, the same individuals who imply that increasing tax rates on drilling will provide more education funding are also adamant that additional state funding is needed for Medicaid, corrections, mental health services, pay raises for state government employees, water infrastructure, and much more. We are not told which tax rates they would increase to secure funding for these additional expansions of state government. Meanwhile, they are silent about the fact Oklahoma’s government spending, tax collections, and available funds for public education are at all-time highs, or that Oklahoma still gives state tax dollars to golf courses and rodeos.

Jonathan Small President

Jonathan Small


Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.

Dave Bond Vice President for Advocacy

Dave Bond

Vice President for Advocacy

Dave Bond serves as Vice President for Advocacy at the Oklahoma Council of Public Affairs. He was previously the CEO of OCPA Impact, OCPA's 501(c)4 action partner. Since 2011, Dave has advocated at the Oklahoma Capitol on issues of free enterprise, individual initiative and limited government. He has been referred to in the Tulsa World as "a prominent Oklahoma anti-tax lobbyist". Prior to his advocacy efforts, Dave worked in Oklahoma elections, focused mostly on state legislative campaigns. He was the executive director of the Republican State House Committee, the campaign arm of the Republican caucus of the Oklahoma House of Representatives. Dave also worked with the campaign consulting firm A.H. Strategies and with the inaugural campaign of former Corporation Commissioner Jeff Cloud. In addition, he served in the media and communications divisions of the Oklahoma House of Representatives. Dave has lived in Oklahoma most of his life and is a graduate of Oklahoma State University. He and his wife Marsha have two sons and live in Yukon.

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