If Democrats have their way, gas prices will surge even higher
If you believe the talking points of Congressional Democrats and the Biden administration, Americans are seeing high gas prices through no fault of theirs but because of two reasons — Vladimir Putin’s invasion of Ukraine and the price gouging of selfish American oil and gas producers.
This outrage is laughable because Democrats are actively pursuing at least 17 energy tax increases that would raise prices for families and small businesses.
President Biden’s fiscal year 2022 budget includes a dozen tax increases on American energy. The Democrats’ socialist tax-and-spend bill, Build Back Better, includes several tax hikes on energy including a home heating tax. Progressives like Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D- R.I.) want a 50 percent windfall profits tax on oil and gas businesses.
Higher taxes do not just hit businesses — they are also passed along to consumers in the form of higher prices. Raising taxes on corporations — as Democrats have repeatedly proposed — will hit families and businesses through the increased costs of basic goods and services.
The Democratic push for higher taxes on American energy producers and manufacturers will see the price of gasoline and energy increase, despite the fact that consumers are already facing record-high gas prices. In the past 12 months, gasoline has increased by 38 percent, while energy has increased by 25.6 percent.
However, things would be much, much worse if Democrats have their way.
First, Biden’s FY 2022 budget included 30 tax increases totaling $3.5 trillion. This included roughly a dozen tax increases on American energy, which the left routinely characterized as tax “loopholes.”
However, these provisions promote manufacturing jobs and American energy independence. Repealing them would only lead to higher prices, less investment and fewer jobs. For instance, the deduction for intangible drilling costs (IDCs) allows independent producers to immediately deduct business expenses related to drilling such as labor, site preparation, repairs and survey work.
As noted in a 2014 study by Wood Mackenzie Consulting, repealing the deduction for IDCs would cost 265,000 jobs in the long-term.
The study notes the elimination of IDCs would also result in a $407 billion reduction in investment, or roughly 25 percent of the capital used by producers to continue investing in new projects. This would mean even less oil and higher prices for American consumers.
The Democrats’ trillion dollar socialist “Build Back Better” proposal doubles down on this approach with several tax increases on American energy including a 16.4 cents per barrel tax on crude oil and petroleum products that would raises taxes by nearly $13 billion and an $8 billion home heating tax.
Americans understand that these taxes will increase energy costs — according to polling conducted by HarrisX, 66 percent of voters believe these energy taxes will increase energy costs, compared to just 12 percent of voters who do not think it will increase costs.
This is not the only way prices would go up — the legislation also includes $800 billion in tax increases on American businesses that would further exacerbate inflation and raise prices for consumers.
More recently, Democrats proposed a windfall profits tax which would impose a 50 percent tax on the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019. This could raise taxes by as much as $450 billion over the next decade and would be used to finance a new welfare payment, that in combination with other Democratic policies, will pay people not to work and drive inflation.
A windfall profits tax has been tried and failed in the past. It was signed into law in 1980 by Jimmy Carter but was repealed eight years later. The Congressional Research Service has noted that the windfall profits tax was “an extremely complicated tax to comply with and administer,” that it generated a fraction of the revenue projected and that it raised the cost of gasoline and increased dependence on foreign oil.
The Democrat’s tax obsession is not limited to energy — they want to use higher taxes as the solution for everything. They have pushed a global minimum tax agreement based on the belief that we should be partnering with Europe, China, Russia and the rest of the world to ensure businesses pay their fair share. They have pushed a 95 percent tax on American pharmaceutical manufacturers as a solution to lower the cost of medicines. They have pushed a financial transactions tax on every single stock trade as a solution to get tough on Wall Street and even proposed a tax on businesses that do not pay their workers $15 per hour.
While Democrats are playing politics with high energy prices and rampant inflation in general, the bottom line is their policies of higher taxes, more spending and more regulations make these problems worse, not better.
Alex Hendrie is director of Tax Policy at Americans for Tax Reform.
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