Unfortunately, even initial signs indicate a substantial risk of the House and Senate resolutions becoming mired in another round of political theater. Worse, thanks to the work of tax-hikers in the upper chamber, the stage could be set for a tragic reprise of policies that will create a significant drag on the very enterprises we need to keep powering us out of our economic doldrums.
As the casts on both sides of the Capitol Hill assemble for the unfolding drama, Senate Democrats allied with the Obama administration appear poised to read from a trite script. Early details of their plan suggest that instead of relying mostly on structural spending restraint and entitlement reform, they’ll be leaning even harder in the direction of taxes, hitting those actors in our economy that are perceived to be politically convenient targets. That almost certainly includes the nation’s oil and gas companies, who have proven over the course of the last political generation that they are the deficit reduction gimmick of choice for many on the left.
But the implications of such policies, specifically on oil and gas, are grave enough that they cannot simply be brushed aside as mere plot twists with no real-world consequences. Quite the contrary. They would do nothing to reduce the price of energy. They would do nothing to create jobs. And they would do nothing to meaningfully address the nation’s broken budget and tax systems. About all they would achieve is to further imperil America’s fragile economic recovery.
That’s why the National Taxpayers Union has launched a campaign to highlight the fallacy of increasing taxes on American oil and gas producers. Through direct public outreach and an online platform, we are encouraging lawmakers to engage in a more pragmatic effort to address our deficit challenges – an effort to Stop the Tax Attack.
Proposals to tax oil and gas producers are as disingenuous as they are dangerous. They are rooted in the argument that, somehow, these companies are the recipients of “special tax breaks” unavailable to other sectors and that they do not pay their fair share. As a result, they are typecast as villains who are a drain on our economy and are at the heart of the deficit issues that plague us.
The reality is less dramatic. Most of the oil and gas tax provisions the Senate resolution takes aim at are broadly available to myriad sectors of the American economy, chief among them a deduction for domestic job creators and a “dual capacity” credit that helps prevent double-taxation of earnings abroad. Contrary to political spin, they aren’t subsidies slipped secretively into legislation. They are intended – rather awkwardly – to offset the high rates and “worldwide income” taxation policy that afflicts the U.S. system.
A case can be made for getting rid of the deduction and the credit in exchange for less complexity and lower rates, but it must apply to all businesses. And while many obtuse parts of the tax laws apply to very narrow business situations, they should be addressed through wholesale tax reform too – not by scapegoating any particular industry.
Beyond semantics, dollar and cents are involved too. Oil and gas companies already pay a tax rate, on average, of more than 41 percent. That is significantly greater than the rate paid by the rest of the companies on the S&P Industrial Index, who shoulder an average 26.5 percent tax load. Oil and gas companies pour millions of dollars into federal coffers every day – providing our government with one of its more lucrative revenue streams. New taxes on these firms won’t make that revenue stream stronger. Schemes such as selective repeal of dual capacity protections would make our energy industry less competitive, leading to a host of negative repercussions for workers and consumers.
American oil and gas companies are investing tens of billions of dollars into our economy each year. They comprise one of the few sectors that continues to reliably add jobs. They provide the energy that we need to keep the United States at the forefront of the global economy. The House’s Budget Resolution recognizes these facts, and avoids such punitive tax measures. The Senate’s proposal fails on this score.
In short, Washington needs to stop play-acting at tax reform and start working on a system that simpler and less burdensome for everyone. It’s time to get real. It’s time to Stop the Tax Attack.
Sepp is executive vice president of the National Taxpayers Union.