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Experts Agree: Politically Convenient Energy Taxes Won‘t Help Economy or Energy Security

by Douglas Kellogg / /

With gas prices officially besting $4 per gallon this week, partisan politics are reaching a feverish pitch in Washington DC. Posturing and finger pointing amongst politicians bent on pursuing any measure that might divert the wrath of angry constituents has led to legislation which would eliminate so-called “subsidies” for “Big Oil.” Far from the answer to higher pump prices, these damaging tax increases will ultimately hurt energy consumers and could threaten the national economy and energy security.

What would be the effect of politically driven new energy taxes? Just look at what the experts are saying:

“[One of President Obama’s targets] is the foreign tax credit, available not just to manufacturers, but to every American company doing business overseas. The government gives a credit for taxes paid to foreign governments. Some politicians think we should take this away from energy companies, raising $800 million in taxes; some think we should take it away from every company — effectively taxing them twice. But it strains credibility to call it a ‘special’ break for oil companies.”

(Former U.S. Senator John E. Sununu, The Boston Globe, 5/09/2011)

“The U.S. is the only country that taxes foreign revenues in the first place, so the dual capacity credit allows U.S. companies to compete fairly against foreign competitors. Doing away with it would dramatically disadvantage American firms relative to their foreign rivals.”

(LSU Endowed Chair of Banking Joseph Mason, The Wall Street Journal, 7/30/2010)

“Taxation systems don’t exist in a vacuum in an increasingly-competitive world. The unintended consequences of proposed changes would likely accelerate the shrinking position of U.S. companies internationally, which would be bad both for the U.S. economy and for energy security.”

(IHS CERA Chairman Daniel Yergin, CERA’s “Fiscal Fitness: How Taxes At Home Help Determine Competitiveness Abroad” Report, 9/2010)

“My estimates suggest that repealing both Section 199 and dual capacity credit would produce extensive economic losses to the U.S. economy for the next decade, including $341 billion in decreased economic output, almost $68 billion in wage cuts, and initial losses of over 154,000 jobs in 2011.”

(LSU Endowed Chair of Banking Joseph Mason, “Regional and National Economic Impact of Repealing the Section 199 Tax Deduction and Dual-capacity Tax Credit for Oil and Gas Producers,” 9/13/2010)

“In addition when we move to the safe harbor definition, on both rate of return and on the value that a company can bid, the United States finds itself at the bottom of the competitive pile … If you reduce the activities of U.S. companies internationally, then there must be long term reduction in the income that can be repatriated. Interestingly, when we think in terms of political support, it is often the oil and gas industry or the resources industry generally that is a leader in terms of entry into new countries and in terms of reestablishing diplomatic ties. The resources industry tends to be in the vanguard.”

(IHS CERA Chief Energy Strategist David Hobbs, Brookings Event, 9/27/2010)