By Mark Haggerty and Julia Haggerty, Ph.D., Headwaters Exonomics— The Obama administration has proposed eliminating several federal tax breaks for the oil and natural gas industry. This raises an important question: Do tax incentives influence oil production? At a time of both record budget deficits and energy industry profits, both Montana and the federal government should look to the experience of other states for answers.
Many states are especially reliant on revenue from oil and natural gas. According the U.S. Census of Governments, severance taxes accounted for 74 percent of all state tax revenue in Alaska, 34 percent in Wyoming, and 9 percent in Louisiana in 2010. This reliance encourages close attention by states to the assessment of the impacts of rates and incentives.…