Property Tax Post: How Will Plummeting Oil Prices Impact Property Taxes?


Jurisdictions around the county that receive significant revenue from property taxes on oil and gas are feeling the squeeze of uncertainty as oil prices continue to fall. The possible repercussions and opportunities that the recent collapse in energy prices will have on Texas are outlined in an article by Noah Smith posted on Bloomberg View. While Smith focuses on economic ramifications and policy reform opportunities, property taxes and promised cuts will also be implicated. And Texas is not the only state that will be affected.

In Texas, the new governor-elect, lieutenant governor-elect, and state comptroller all ran their campaigns on large tax cuts, but with West Texas Intermediate crude oil dropping over 50 percent since its high of $107/barrel in June 2014, officials may be forced to temper their ambition for any possible property tax cuts. The state’s comptroller projected that revenues from oil production will fall by 14 percent over the next two years and revenues from fracking will fall by 8 percent.

State Senator-elect Paul Bettencourt, who has been a vocal proponent of cutting property taxes, acknowledged that big tax cuts will be difficult to deliver in light of falling oil prices. Lieutenant Governor-elect Dan Patrick, however, promised that oil prices will not dissuade Texas Republican leaders from enacting serious tax cuts, saying “Let there be no doubt—there will be tax cuts.”

But officials in other states, such as Missouri and Colorado, have been closely watching the precipitous fall of oil prices, and trying to figure out how it will affect their states.

The Missouri Department of Revenue estimates that oil and gas wells account for nearly 7 percent of all assessed property in Kansas City. Department of Revenue Spokeswoman Jenine Koranda said that state officials did not anticipate the full extent of the drop in oil prices and that the state could fall short of its severance tax revenue estimate.  But some Missouri state officials think that the benefit lower oil and gas prices provided for consumers could offset any drop in property tax revenues by boosting income and sales tax revenues via increased economic activity.

Not all towns with large oil revenues have felt the pinch yet. Weld County, Colorado had the highest job growth in the United States in 2013 as workers rushed to the oilfields. As of January 2015, there has yet to be a drop in tax revenue, but local officials do expect a drop off once more data begins coming in.

It’s unclear to what extent extra money consumers’ pockets from cheaper oil will balance out a potential drop in revenues, but as 2015 revenue data comes in and lawmakers begin turning their campaign promises into bills and legislation, it will be interesting to see how changed circumstances will affect campaign promises.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should politicians who were elected on campaign promises to lower property taxes rethink the policy in light of oil prices?

Sign up for a free trial of the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.