State Taxation of Natural Resources

Report Outline
Natural Resources as Source of New State
Taxation of Mines and Minerals
Taxation of Timber and Forest Resources
Special Focus

Natural Resources as Source of New State

Severance Taxes to Meet Social Security Costs

All of the 43 state legislatures meeting in regular session next year will be on the hunt for new sources of revenue. Many of them will be faced with the necessity of raising tax funds to finance newly-enacted social security measures. Some will be forced to find substitutes for expiring sales taxes, against whose renewal many of their members were pledged in the 1936 campaigns. “Under such circumstances, a number of states are likely to follow the lead of Texas, whose legislature, late in October, raised existing taxes and levied new taxes on the extraction of natural resources within the state.

To provide funds for payments of old-age pensions, taxes on oil production were raised from 2¢ to 2¾¢ a barrel, tonnage taxes on sulphur were increased from 75¢ to $1.03, and taxes on natural gas were increased from 2 per cent to 3 per cent of market value. In addition, a tax of 10¢ a ton was levied on marble, a tax of 10¢ a ton on cinnabar ore, a tax of 5¢ a ton on all other ores, and a tax of 3 per cent of the market value of carbon black. The increase in the oil tax is expected to add upwards of $3,000,000 to the revenue received from the present tax, which in 1935 amounted to more than $8,000,000.

Governor Allred of Texas, in a special message to the legislature urging a “substantial increase” in the oil tax, said he had been “reliably informed that Louisiana and Oklahoma will in all probability have to increase their tax on oil in order to meet their own pressing security problems.” Investigation by the Oklahoma Tax Commission of comparative oil taxes in Oklahoma and Texas was ordered early in October by Governor Marland. The commission's findings will be laid before the Oklahoma legislature in January. In Michigan, proposals to supplement property taxes on copper and other metal mines with tonnage taxes on mine production may be brought forward next year.