Oil Production Problematic For Local, State Governments

State and local governments that receive taxes from the production of oil and natural gas could faces challenges as prices plunge.

The falling gasoline prices have no effect on two key taxes that state and local governments rely on: sales taxes and motor fuel taxes.

But the falling prices of oil and natural gas will have an effect on two other taxes that are tied to oil prices and production: the state severance tax; and property taxes that are levied by the state and most other local units of government.

The severance tax is a tax on minerals extracted out of the ground in Kansas. Property taxes are also levied on oil and gas wells.