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Revised bill proposes 2.5% tax rate for Ohio horizontal drillers

As part of his off-year budget bill, Ohio governor, John Kasich, has proposed a top severance tax rate increase on horizontal drilling to 2.5% as part of a tax package designed to lower income-tax rates. The bill, which is expected to be supported by the Ohio Oil and Gas Association, will allow for a broader exemption for drillers from the commercial activity tax, and it would implement a gross-receipts tax at the first point of sale, after deductions for costs such as gas transportation and processing.

Since early 2012, Kasich has been pushing to increase Ohio’s severance tax on horizontal hydraulic fracturing, but has met with unwillingness by Republican legislators. His latest attempt is set to be introduced in committee today and Kasich hopes to see a full House vote on May 14, 2014. Under Kasich’s plan, Ohio would still have the lowest effective tax rate in the United States, 63% below the average tax rates of other states that have significant drilling activity.