Big Oil Gets a Windfall: No Sales Taxes

I don’t know how this got past me, but a couple of weeks ago, oil companies operating in the state of Texas were told that they don’t have to pay sales taxes for oil field production equipment.

Oil companies, currently making money hand over fist, don’t have to pay sales tax like you do. Sales tax on equipment to produce petroleum.

And ironically it was District Judge John Dietz, who is famous for his ruling on the constitutionality of state school funding who made this ruling last April 11^th. State sales taxes are a big part of how school districts get their funds from the state, and Dietz’s ruling would not only put the state on the hook to refund $2 billion in sales taxes already collected, but it would deny the state revenues amounting to $2.4 billion in the next 5 years.

More recently it came as some surprise to the judge that some damnfool judge in Texas ruled to deny his state billions of dollars in revenue, only to discover that the damnfool judge was none other than himself.

From the Austin American-Statesman:

“On Thursday, the ever-colorful Dietz recalled that he had been reading The Wall Street Journal over a breakfast of oat gruel when he saw that some Texas judge had recently overturned 50 years of tax law and crippled the state budget.”

"‘What fool did that?’ Dietz said he wondered as he read the story. ‘I'll be damned; it's me.’"

It seems that Judge Dietz was persuaded by an oil company lawyer’s specious argument that produced crude oil was a manufacturing process. In Texas, buying equipment for manufacturing is tax-free. More of that attracting industry to Texas policy that robs its citizens and schoolchildren of much-needed revenues. It is a manufacturing process, they argued, because in the act of raising oil from the reservoir where it exists at much higher pressure than we have here on Earth’s surface, the pressure decrease allows some gas to come out of solution.

Natural gas is “manufactured” because it follows Boyle’s Law.

In truth, the petroleum is fairly useless if it is kept at those high pressures because it needs to stay in the ground so the pressure can be maintained. In the act of raising it to make it useful, natural gas is produced because of the laws of physics.

Judge Dietz bought a specious argument manufactured by unscrupulous lawyers.

This is why science needs to be taught at law school.

So as a result, Dietz is going to have a “stinkin’ rehearing.” Now I find it interesting that the reason Dietz came up with second thoughts wasn’t because he listened to flawed and unscientific logic, it was because it would take too big of a bite out of the state’s revenues.

It’s not so much about what is right as it is about what’s the bill?