Alabama Natural Gas Tax Hike Shelved

Published July 1, 2008

As Alabama legislators headed home after the end of a special legislative session on June 1, many feared they’d soon be back to address a tax debate they had hoped was put to rest in the regular session.

The matter reaches back to September 2007, when the state Department of Revenue determined ExxonMobil was due $41 million for deductions it should have been granted, but was not, for processing natural gas off the Gulf Coast.

In response, Gov. Bob Riley (R) proposed a $40 million annual tax surcharge on the sale of natural gas drilled off the Gulf Coast from depths of 18,000 feet or more–a tax that would apply only to ExxonMobil.

Intense Opposition

Riley’s proposal was shelved in May, but at press time legislators expected him to call a week-long special session, during which he might revive the tax measure.

“Selective and random application of the tax code to punish or reward business and industry … will present a serious impediment to the development of new business within our state,” said Jerry Mitchell, president of the North Alabama African American Chamber of Commerce. “Stable tax and regulatory policies are essential to encouraging needed investment.”

Riley faced almost immediate opposition to the proposal, causing it to falter initially in a state House committee. Some legislators grew more comfortable with the proposal after it was changed to refer to the surcharge as temporary.

Consumer, Trade Group Alliance

Local consumer and trade groups joined forces to oppose Riley’s legislation, stressing the potential damage to the state’s business climate and economy if the measure passed. In late April, these groups gathered at the steps of the state capitol to express their opposition.

George Clark, president of Manufacture Alabama, pointed out at the gathering, “Any tax measure that causes businesses and industry in our state to take a hit will also impact local jobs and economic growth.”

National taxpayer advocacy groups also weighed in on the legislation, stressing the importance of keeping tax burdens low in order to keep sky-high energy prices from rising further and crushing consumers in the state.

“Gov. Riley’s tax hike punishes business that brings jobs and growth to Alabama,” said Grover Norquist, president of Americans for Tax Reform. “Any move that will drive investment away, or threaten to hike energy prices, should be rejected outright by any legislators in Montgomery who consider themselves pro-taxpayer and pro-consumer.”

Karri Bragg ([email protected]) is a state government affairs manager at Americans for Tax Reform.