Energy Business Taxes

Congress has proposed several ways to hurt our energy industry with new taxes. Ideas have included:

* Raising taxes on oil and natural gas produced on American soil and in the Gulf of Mexico.

* Repealing a manufacturing deduction currently granted to energy producers for the extraction and refining of oil. Since manufacturers in other industries will continue to qualify for this deduction, this is clearly an effort by Congress to punish domestic energy companies for political reasons at the expense of our pocketbooks.

* Imposing a “Windfall Profit Tax,” which, in its latest form, would apply to individual companies that don’t conform to Congress’s decree to pursue “renewable energy” sources.

Another ill-considered scheme is the elimination of a credit U.S. energy companies receive for the taxes they pay in foreign countries, with “upstream” and “downstream” activities accounted for separately. Congress has proposed combining these credits into one foreign oil “basket,” a program with a lower overall credit limit, in effect requiring double taxation on U.S. companies’ overseas productions. This policy will diminish incentives for overseas production by investor-owned, American energy companies and, ironically, give a competitive edge to foreign firms.

Political Games Over Energy Security

Despite what Washington politicians shout from atop their soap boxes, taxes on energy production undermine energy security. Policies that act as a disincentive for oil and natural gas production will ultimately hurt businesses and consumers by driving supply down and prices up.

Many congressional supporters of energy taxes believe “energy independence” should be the ultimate goal for our country. Despite its feel-good nature, this is neither a realistic nor desirable outcome. We are not completely “food independent” or “clothing independent,” nor should we seek to be. Trade with other nations has benefited our economy in many ways, including lower prices for consumers, less taxpayer outlays for foreign assistance, and more jobs for export-intensive U.S. industries.

Instead of mindlessly focusing on the politics of energy, Congress ought to establish a policy that treats all sources equally and allows the market to determine winners and losers.

Rather than playing political games with credits and deductions in the tax code, Congress should establish a fair and more transparent tax system that treats all energy companies, traditional or alternative, in the same manner.

America’s combined average federal/state corporation tax rate is among the worst in the industrialized world, while a recent NTU study pegged the business sector’s compliance cost for this monstrous system at more than $170 billion annually.

Simpler, less burdensome taxes for everyone – workers, investors, small business owners, managers, and retirees alike – are imperative for America’s future.