Gov. Kasich has been pushing a tax on oil and natural gas drillers for a year, saying that what he has called a reform in the severance tax could offset the income tax cut that he’s talked about since he launched his campaign for governor. The drilling tax hike was stripped out of his budget last year, and he said at the end of the year that after looking at the impact of severance taxes in other states, he would make it a cornerstone of this budget. 

“There is no danger that people are running away, and since we’ve been talking about this, they’ve continued to invest billions – I mean, we’ve got $2 (billion), $3 billion invested in this state. Secondly, they have very high severance taxes, and they pass that on to us. So we pay to keep (other state's) taxes low, which is just unbelievable to me.”

A big "but" from GOP lawmakers
Seated next to Gov. Kasich at that event in December was House Speaker Bill Batchelder, who was also asked about the severance tax.

“Seems to me that at this point, looking at other taxes as we are going to do, I think we want to be very careful before we impose that. Will our caucus vote for it? I think that they will. I don’t think that there’s any question about it.”

But now the 4 percent severance tax on big oil and gas drillers is in the $63 billion, two-year budget, to help fund a 20 percent cut in the state income tax for all Ohioans and a 50 percent cut for small businesses. Still, Speaker Batchelder is sounding a lot less welcoming toward the severance tax increase. 

“We certainly don’t want to discourage people from coming here, and I’ve made that point strongly with my good friend the governor, that, you know, let’s do everything we can to encourage people to come create jobs. And if we do that, then I think we’re going to have a source of taxation at some point down the road that would be very helpful. But not now, I don’t think.”

Batchelder says he thinks the governor’s claims of billions of dollars in investment in Ohio by drillers is – using the speaker’s word – “optimistic.” And he says the income tax cut could still happen with other cuts in other spending. Batchelder the Republican caucus he leads, which includes 60 of the 99 House members, is leaning toward opposing the severance tax.

Majority Whip Cheryl Grossman of Grove City near Columbus may have already made up her mind. 

“I am opposed to the severance tax as it’s been presented. I think it is so important for us to embrace those 200,000 jobs that are predicted to be here by 2015, and I think we need to be extremely cautious that we don’t do anything to discourage the potential that can come here to the state.”

Also in the anti-severance tax camp is Sen. Troy Balderson of Zanesville in eastern Ohio, the epicenter of the oil and gas drilling boom. 

“It’s going to hurt local producers. And I know that’s talked about, how they won’t be affected in this legislation – but they are affected. And that’s who we need to focus on. That’s where my jobs are that are there right now, my local companies.”

Some in the GOP side with the governor on this
But not all Republicans are leaning against the severance tax. Sen. Bill Seitz is a longtime conservative lawmaker from Cincinnati. 

“I have not been a stalwart opponent of the governor’s proposal on severance tax. I think, in the main, it is a reasonable proposal. The fact of the matter is, these folks have spent billions of dollars to buy the rights to explore for oil and gas in Ohio. They are not going to walk away from that investment.”

Kasich’s position has been boosted by polls showing a growing majority of Ohioans support a tax on oil and gas drillers. And when he unveiled his budget with the severance tax in it, he warned those who oppose it that this may be the last chance to have some control over it. 

“At some point it’s going to happen. It’s either going to happen through this, or it’s going to happen on the ballot. One way or the other, it’s going to happen.”

Republican opposition to the severance tax – as well as the Medicaid expansion – could put Democratic lawmakers, who are in the minority in both the House and Senate, in a surprisingly important position. The governor would need their votes to get the budget as it is passed. Most Democrats support a severance tax increase, but want the revenue to go to local governments and schools to offset cuts in last year’s budget.