Special interests pushing for oil extraction taxes seem to falsely think the oil and gas industry does not pay its fair share. Let’s set aside the reality that consumers will ultimately pay higher oil taxes and focus on the truth that in California alone, oil and gas companies paid more than $22 billion in state and local taxes in 2012.
Kern County has become the focal point in just how much energy companies’ tax revenues play in local government budgets. Kern County Supervisors recently declared a fiscal emergency due to a $61 million drop in property taxes as a result of falling oil prices.
In order to triage this rapid unexpected revenue loss, local officials are tapping their reserve funds and looking at budget savings within fire services. The County Fire Department must absorb nearly one-third of this budget hit.
There’s just as much at stake to lose in Los Angeles.
Since Los Angeles County is the largest county in California, it may not come as a surprise that more jobs related to the oil and gas industry are within this county than anywhere else in the state. More than 103 thousand local jobs are a result of the oil and gas industry. These jobs pay well and generated nearly $9 billion in labor income in 2012 alone.
In addition, these jobs, along with property taxes, excise taxes, fines, fees and permit costs, create significant revenues. In Los Angeles County, oil and gas companies paid more than $5 billion in state and local taxes in 2012. To put that in perspective, that’s nearly one-quarter of the County’s approved $21 billion budget this fiscal year.
Consequently, Los Angeles County coffers may not be immune to the budget woes facing Kern County.
Just when the county’s fiscal footing improved and officials started restoring cuts made during the Great Recession, such as restoring library hours, budget writers might find themselves right back where they were during years of multi-million dollar deficits.
Slowing down domestic oil production isn’t just a problem for the public sector, the private sector will take a hit with job losses beyond the energy industry.
Many workers within the industry patronize local businesses and the loss of these local jobs will be a direct hit to the bottom lines of many struggling small businesses, like the hundreds of members I represent.
Updated information is due later this year, but according to the U.S. Census Bureau’s most recent data available, Los Angeles County has the second largest number of black-owned businesses in the nation. As a result, Los Angeles’ communities of color have the most to lose when our economy takes a hit.
And in a painful twist of irony, fewer tax dollars will threaten the ability of cities and counties to deliver critical services at a time when there may be increased demand for services due to local workers losing their jobs.
This is particularly troubling since our member businesses believe strongly in lifting up the entire community and we uniquely understand how the tax revenue our entrepreneurs pay helps to fund our schools, our roads, and services to keep our communities safe.
These negative impacts are avoidable and the solution is simple. We can protect our environment and our economy by safely developing domestic energy supplies.
Creating energy here in California – under the nation’s strictest standards – helps keep fuel costs affordable for all Californians, creates jobs across a wide range of sectors, generates significant revenue and ensures that we meet our own energy needs.
There are enough roadblocks to opportunity for California’s small businesses, it doesn’t make sense to create more hurdles to prosperity. Let’s continue to invest in California energy production, which keeps jobs and desperately-needed tax dollars here in the Golden State, where they belong.