To the pragmatist, though, the signs don’t look as good.
Rather than using the public stage as a means of elevating the debate – focusing on the fundamental elements of fairness and simplicity that must be at the heart of effective tax policy – lawmakers and interest groups are instead clinging steadfastly to well-worn gimmicks, sound bites, and tired attacks that focus on scoring political points.
At the center of all the game-playing is the push to levy more taxes on the American oil and gas industry. Such proposals must be recognized for what they are: exceedingly unproductive, intellectually untenable, and terribly far-reaching for an economy still on shaky ground.
Advocates in the White House and Congress have, for years, sought to characterize business deductions and credits taken by oil and gas as “subsidies” or special-interest handouts. Yet, the biggest provisions targeted by the left are widely available across the economic spectrum – provisions put in place to give American companies a chance to stay competitive in spite of high tax rates and mind-numbing complexity. Quite simply, they are not subsidies at all.
To assert that this industry is not carrying its fair share of America’s tax burden, or that it is somehow “dodging” its obligations, is likewise misleading.
The reality is, American oil companies are – consistently – ranked at the top of the list of the companies carrying the heaviest tax burden in the United States. In a recent analysis conducted by USA Today, ExxonMobil was found to be the nation’s largest taxpayer, followed by Chevron. ConocoPhillips rang in as the sixth largest taxpayer in the United States.
These are not isolated cases. As noted by the Wall Street Journal, oil and gas companies pay, on average, a tax rate of greater than 41 percent. For comparison’s sake, other S&P companies pay an average of 26.5 percent.
ExxonMobil, currently the owner of the nation’s highest tax burden, staggeringly paid $3 in taxes for every $1 in profit generated. In short, oil and gas companies pay tens of millions of dollars in taxes each and every day, and provide our federal government one of its most stable and most significant streams of revenue – all by simply conducting their day-to-day business of exploration and development.
But the contributions don’t stop there. Oil and gas supports nearly 10 million jobs, and is adding them at a rate well in excess of the national average. It is also among the largest domestic investors as well, pumping more than $36 billion into the American economy in 2011 alone.
Encouraging companies like these to do what they do (or at least not standing in their way) is a far more constructive act than any attempt to harvest more revenue through short-sighted, punitive tax hikes. While oil and gas seems to make a tempting political target, singling out any industry in this manner is precisely the wrong opening gambit in any tax reform effort. Doing so will only thwart what should be the ultimate goal: lower rates and a simpler base for everyone.
If policymakers hope to fix our nation’s fiscal mess, then they cannot allow themselves to be misled by hollow attacks and empty rhetoric. Tax policy must be founded on honesty. It’s time to stand up and stop the tax attack.
Sepp is executive vice president for the National Taxpayers Union.