Land tax revenues increasing amid the oil downturn
Texas is one of the country’s preeminent wealth generators for both agriculture and oil and gas.
In fiscal 2016, the two industries contributed a combined $3.4 billion in tax revenues to the state. The downturn in oil and gas activity has had a significant impact on Texas’ tax receipts, however, and land income tax revenues are becoming a more prominent piece of the state’s tax portfolio.
Comparing just the natural gas production tax, the oil production and regulation tax, and land income tax revenue to each other, land income tax revenue has grown from just a fraction of what oil or gas taxes provided the state separately, to now generating more income for Texas than natural gas does alone. Combined, taxes generated from oil and gas acreage still amount to more than those generated by agricultural land, but their share of the overall tax revenue in the state is shrinking, while the share of Texas’ tax revenue from land income has grown since 2014.
In fiscal 2014, land income tax revenue amounted to $44.5 million, according to the state’s comptroller. By fiscal 2016, that number had grown more than 25 times to $1.1 billion, making it a more profitable source of taxes for Texas than natural gas, although oil production and regulation still generated more with the state reporting $1.7 billion in taxes from oil in fiscal 2016.
Looking at the taxes generated from oil and gas, as well as agricultural land, as a percentage of the total tax income for Texas, the oil and gas industry continues to contribute a larger piece of the overall pie, but land income’s share has been increasing.
In fiscal 2014, land income tax revenues contributed just 0.01% of the state’s total tax revenue, compared to 12.9% for oil and gas. As the oil and gas downturn took hold, the industry’s contribution to Texas’ taxes began to shrink with the shrinking price of a barrel of oil set by the global market. In fiscal 2015, oil and gas contributed 9.1% of total revenue while land income tax revenues brought in 3.2%, and in fiscal 2016 the share of taxes from oil and gas shrank again to 4.5%, coinciding with a drop in land income’s share of the total income as well, which fell to 2.2% of total tax revenues.
Oil and gas continue to generate more income for the state of Texas than land income tax revenue, but the downturn in oil prices put a dent in the percentage of the overall budget provided by extracting hydrocarbons.
