How states should tax new fossil fuel boom

November 14, 2014

In “How Should States Tax New Fossil Fuel Boom,” Barry Rabe speaks with Michigan Radio’s Stateside with Cynthia Canty to discuss the taxation of fossil fuels, which has become a frontline political issue in many states due to the growth of fracking. The big question states are facing – especially those that haven’t historically been players in the oil and gas industries – is what to do with the new revenue. 

Rabe and U-M law professor Rachael Hampton have been examining how states have been leveraging so-called severance taxes, which are levied on companies that extract nonrenewable natural resources. While oil and gas extraction is fairly limited in Michigan – the state generally ranks between tenth and twentieth in the country in terms of gas and oil production – Rabe contends that those in Lansing should be keeping an eye on what other states doing.

“Michigan has an opportunity here because the fracking process is moving so slowly, and that gives Michigan, presumably, the chance to learn from the experience of other states,” Rabe said. Currently, only half of 1 percent of Michigan’s budget comes from its version of severance taxes, according to Rabe.

Barry Rabe is a professor of public policy at the Ford School, and director of the Center for Local, State, and Urban Policy (CLOSUP). He is also a non-resident senior fellow at the Brookings Institution. Much of his recent research examines sub-federal development of policies to reduce greenhouse gases in the United States and other federal systems.

 In 2006, Rabe became the first social scientist to receive a Climate Protection Award from the U.S. Environmental Protection Agency in recognition of his contribution to both scholarship and policymaking. He holds additional appointments at the University of Michigan in the Department of Political Science, the Program in the Environment, and the School of Natural Resources and Environment.