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Kasich Indicates NatGas Industry Likely Part of Ohio Tax Reform Efforts

Ohio's Republican Gov. John Kasich told business officials during a year-end luncheon on Thursday that he plans to push hard in his second term to reduce the state's income tax, an effort that could rely in part on increasing fees for the oil and gas industry.

For years, the state's lawmakers have been at odds over updating Ohio's decades-old severance tax, an issue that's only grown more relevant as oil and gas production continues to rise in the Utica Shale. Kasich was reelected in a landslide victory in November, when he defeated Democratic challenger Ed Fitzgerald by a margin of 64-33% (see Shale Daily, Nov. 5)

Kasich himself has floated several severance tax proposals during his time in office. Most recently, he wanted to tax oil and gas extraction at a rate of 2.75% and use those proceeds for his goal of reducing the state's income tax rate by 8.5% over the next three years (see Shale Daily, March 12). In May, the Ohio House of Representatives passed a bill to tax the industry at a rate of 2.5%, with proceeds going to a state treasury fund for regulatory efforts and local governments, among other things (see Shale Daily, May 15).

That bill, substitute HB 375, was sent to the Senate over the summer, but it has languished there since. Last month, industry officials and state lawmakers told NGI's Shale Daily that the Senate would not take up the legislation until next year, especially given Kasich's comments indicating he is willing to re-engage in a severance tax debate (see Shale Daily, Nov. 19). His next budget proposal is due in February and another severance tax proposal is widely expected to be included.

Although the administration has been quiet about the issue, a Kasich spokesman told NGI's Shale Daily after the House passed its bill that "the governor is committed to continuing to reduce Ohio's income taxes. Unfortunately, their new plan still falls short of what the governor believes is needed."

Kasich's recent comments, delivered before the Ohio Chamber of Commerce, are some of his latest on his plans for a second term since the election. Setting the stage for next year's debate, the Associated Press reported that when asked if he would look to business in the state to make up lost revenue from reducing the income tax, he said "you are not going to get this done by just slashing government spending." Kasich also reportedly invited state industries, including oil and gas producers, to work with him on tax reform.

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