State Taxation, Exploration, and Production in the U.S. Oil Industry

Mitch Kunce, Shelby Gerking, William Morgan and Ryan Maddux

Journal of Regional Science, 2003, vol. 43, issue 4, 749-770

Abstract: Abstract How do firms in nonrenewable resource industries respond to changes in state taxes? This paper presents simulations of changes in state production (severance) tax policy on the timing of exploration and output in Wyoming. The framework developed allows for interactions between taxes levied by different levels of government. Results suggest that oil production is highly inelastic with respect to changes in production taxes. Policy implications suggest that increases in production taxes on oil risk little loss in future production. The extent to which these results may generalize to other oil producing states is considered. JEL Codes: H71, Q32

Date: 2003
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