Nelson ran for governor twice as the conservative Republican alternative to Bill Clinton and Jim Guy Tucker in the 1990s. When he first ventured into politics in 1965 as the conservative candidate for president of the Young Democrats of Arkansas, a liberal lawyer from Newport trounced him.
Nelson surfaced in 1980 as Sen. Edward M. Kennedy’s key Arkansas backer in the Massachusetts liberal’s unsuccessful race against President Jimmy Carter in the Democratic primaries. He headed the state’s industrial-development commission under Clinton later that decade. He switched parties in 1990 and, besides his two races for governor, he was the Republican Party’s state chairman and national committeeman. He was a friend and ally of Gov. Mike Huckabee, who put him on the state Game and Fish Commission.
Now, in the fevered anti-tax climate of 2012, Nelson proposes a dramatic increase in the severance tax on natural gas. A Republican pushing a big tax increase? Did he not follow the 2010 election returns? Even the president of the United States, in the face of massive budget deficits, has been slashing taxes, not raising them.
Nelson’s gas-tax initiative may not be wise politics, but it is sensible, practical politics. The 7 percent tax on natural gas production that he proposes would restore the state’s badly depleted road- maintenance program. If not the severance tax, something else—gasoline, car and truck licenses, automotive products and services—will have to be taxed to halt the deterioration of roads and bridges in the state and county highway systems. Nelson’s severance tax would be borne by producers and royalty interests, and not homeowners and businesses. The gas goes into the pipeline with gas from other states and is distributed nationwide, so there is no way it can be passed along to consumers, in Arkansas or anywhere else. For that reason, this tax notion may not be the political poison that many politicians fear it is.
You will remember that Nelson proposed the same initiated act in 2008. Gov. Beebe called a special session to head off a vote on the tax at the general election. The gas industry wrote a tax bill they could live with, the legislature passed it, and the governor signed it. It was supposed to levy a tax of 5 percent on the wellhead value of gas, but it was so filled with exemptions that the actual tax rate might be less than 2 percent. Instead of producing more than $100 million a year, which was Beebe’s estimate, the highways this year will get about $35 million from the tax, far short of road damages caused by the producers’ drilling activity in the Fayetteville-shale counties to our north.
Nelson will spend some of his own fortune, raised in the gas business, to pass the act at the 2012 general election. He says the gas industry, of which he was once the leader, is reaping vast profits from the shale gas and that it is only right that they should share some of that fortune with the public, which is losing that resource forever. Let’s wish him good luck.
The legislature could and should enact a bill raising the tax to 7 percent or something short of that, but it will not. It would take a three-fourths vote of both houses, a practical impossibility.
What the legislature could and should do is make a small correction in the 2008 law that would nearly double the revenues from the tax. It could do that by raising the tax rate on gas from low-producing and new wells, which are exempt from the 5 percent rate, to the rate of 2.6 percent of value. That was the tax rate in 1934, when the Constitution was amended to require a three-fourths vote to increase taxes above the rates in existence then, so the legislature can restore that tax rate by a simple majority vote. But who has the courage to do even that — a half-Nelson, perhaps—in these hysterical times? No one in politics, apparently, except Sheffield Nelson.
