Columns » Ernest Dumas

Sheffield’s odyssey

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Sheffield Nelson's 35-year political odyssey brought him under the flags of Orval Faubus, Ted Kennedy, Bill Clinton, Mike Huckabee and George W. Bush, in approximately that order, so whatever your flavor there has been at some point a good Sheffield Nelson.

The good Nelson — the selfless and visionary one — is back and if we are lucky he will finally see one of his promising impulses to fruition. Nelson is going to try to put a gas severance tax initiative on the 2008 Arkansas ballot.

The timing could not be better. The severance tax initiative would be a perfect counterpoise to the state lottery amendment, which almost certainly will be on the ballot. Both would dedicate their revenues to higher education — scholarships and technical education one would hope — but the severance tax would do it so much more generously and surely and without the countervailing harm of a lottery.

The state government would not be in the position of running a numbers racket, transferring our meager wealth from the poor to the better off or exporting our capital (roughly a nickel of every $1 lottery ticket) to the international oligopoly of Gtech Holdings and Scientific Games Corp., all of which characterize a state-run lottery, even the relatively clean proposition crafted by Lt. Gov. Bill Halter.

Nelson's proposition would bring $100 million a year or so into the state treasury earmarked for higher education. Little of it would come from the poor and most of it from outside Arkansas — the big exploration companies or, if they pass the tax on to customers, users in the Ohio River Valley and points north and east.

How can you beat a deal like that?

Through heavy taxes on natural gas, coal and oil levied by other states from Louisiana to Wyoming, we have been subsidizing the education of children in other states for 50 years. We would finally start getting some of it back for our own kids.

More than any state of the old South, Arkansas has been a colony of the nation, exporting our resources far more cheaply than other states and paying a premium for what we get in return, and this often came on the willful connivance of our own leaders. There is no better example than the invisible severance tax on one of our most abundant resources, natural gas. We ask the drilling companies to pay three-tenths of a penny for a thousand cubic feet, a nearly incalculable fraction of what any other state levies.

Nelson's proposal would levy a tax at about the average of the gas-producing states around us. That would be the 7 percent of the market wellhead price collected in Oklahoma. Texas is higher, 7.5 percent.

No one raises a rational argument against it. A couple of Republicans on the Joint Revenue and Taxation Committee said it's not fair to compare our infinitesimal tax to the big severance taxes of places like Texas because we make companies pay corporate income taxes and Texas doesn't. That is baloney. Texas collects a corporate franchise tax based on a company's capital and its federal net taxable income. The burden almost matches the Arkansas income tax, and under Texas' reformed tax code, enacted last year and dubbed the biggest tax increase in Texas history, the corporate tax burden will far exceed Arkansas's income tax. It will take effect Jan. 1. So that argument is a nullity. Oklahoma and Louisiana, of course, have corporate income taxes that effectively exceed Arkansas's.

Then there is the point of state Sen. Bob Johnson of Bigelow, who is the reason that it is pointless to seek a remedy in the legislature. Johnson says Arkansas would send a terrible message to the country if it made the big exploration companies give something back to the public trust for profiting so handsomely from an ancient resource that will never be replenished.

It will take lots of money and political leverage to get the proposition on the ballot and counter the money spent to defeat it. Sheffield Nelson is a problematical political quantity. His identification with it will spur some old enmities from his two races for governor, his party-switching and his alliance with Huckabee and Bush. But Nelson is irreproachable on this issue. Back in the early '80s, when he was president of Arkansas Louisiana Gas Co., he broke with everyone in the industry and declared it a disgrace that Arkansas did not collect an effective severance tax on gas. He worked for its enactment in 1983, testifying before legislative committees, when Gov. Bill Clinton made it a part of his education program but quietly let it die rather than cross the big gas interests. Maybe Gov. Beebe, who as a state senator voted for the bill then, will join him.

If he still has any, Nelson will not advance his political ambitions, especially in the Republican Party, by raising the extraction tax on gas, but he would earn the gratitude of generations of children.


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