While the idea of increasing taxes on our energy industry is the political equivalent of low hanging fruit, the reality of such a move is that it would actually decrease revenue over time, cost jobs, and lower energy production here in the United States. It would ultimately hit all consumers in the form of higher energy prices.
According to a Wood Mackenzie consulting study, in the short term, new energy taxes would generate roughly $16 billion in government revenues during the first five years; however, the long term impact of higher energy taxes tells a different story. Energy companies would have less capital available to develop new energy sources. That would cause government shortfalls in revenue of $144 billion during the subsequent eight years.
In addition, the study shows how a new tax on the oil and gas industry would sacrifice 170,000 direct and indirect energy jobs by 2014 and see a reduction of domestic oil production by 700,000 barrels per day. On the ledger sheet, hiking taxes on the energy industry is an ultimate loser for the federal budget.
Then there's the matter of truth and fairness.
In fact, you would never know it from the president's inflammatory rhetoric and the bloviations from Capitol Hill, but taxpayer subsidies are not given to energy companies. Political rhetoric aside, these companies simply enjoy the same tax write offs that thousands of other companies receive. In addition, oil and gas companies already pay an effective income tax rate of 41 percent. For the sake of comparison, the average tax rate for other industries is 25 percent. To say the oil and gas industry doesn't pay its fair share is just wrong.
Using political trade winds to deny the energy industry the same tax credits to which every other industry is entitled represents very poor public policy and is the height of special interest legislation. A tax code that has the federal government at the helm of picking winners and losers is a shipwreck waiting to happen, and a serious threat to economic prosperity as well as a setback to broader, comprehensive tax reform.
I have long argued for tax simplification, eliminating tax credits and deductions in exchange for lowering the overall corporate tax rate which is presently the highest in the world. Comprehensive reform should focus on simplifying and restructuring rather than arbitrarily raising taxes on cherry-picked industries. Targeting individual tax deductions outside of broader reform is a recipe for more government spending and provides an excuse for delaying the corporate tax reform we desperately need.
Finally, imposing an additional tax on one of the few sectors of economy that is prosperous, growing, and is creating American jobs is a completely wrongheaded approach. Why quash the shale natural gas boom and the energy manufacturing renaissance that is just now establishing a foothold in the U.S.? And why keep the majority of public land - land that belongs to the American taxpayers - off limits to oil and natural gas production? Wouldn't production of these vast resources - which a recent study calculated would generate a $2.7 trillion increase in federal tax revenues over the next 37 years - be a far better alternative to increasing energy taxes and eventually causing a revenue shortfall?
It makes no sense to make our energy industry and all U.S. energy consumers a political whipping boy at a time when the government needs to do some responsible belt-tightening of its own.
Forbes is the chairman and editor-in-chief of Forbes Media.