With gas prices officially besting $4 per gallon this week,partisan politics are reaching a feverish pitch in Washington DC. Posturing andfinger pointing amongst politicians bent on pursuing any measure that mightdivert the wrath of angry constituents has led to legislation which wouldeliminate so-called “subsidies” for “Big Oil.” Far from the answer to higherpump prices, these damaging tax increases will ultimately hurt energy consumersand could threaten the national economy and energy security.
What would be the effect of politically driven new energytaxes? Just look at what the experts are saying:
“[One of President Obama’s targets] is the foreign taxcredit, available not just to manufacturers, but to every American companydoing business overseas. The government gives a credit for taxes paid toforeign governments. Some politicians think we should take this away fromenergy companies, raising $800 million in taxes; some think we should take itaway from every company — effectively taxing them twice. But it strainscredibility 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 revenuesin the first place, so the dual capacity credit allows U.S. companies tocompete fairly against foreign competitors. Doing away with it woulddramatically disadvantage American firms relative to their foreign rivals.”
(LSU Endowed Chair of Banking Joseph Mason, The WallStreet Journal, 7/30/2010)
“Taxation systems don’t exist in a vacuum in anincreasingly-competitive world. The unintended consequences of proposed changeswould likely accelerate the shrinking position of U.S. companiesinternationally, 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 anddual capacity credit would produce extensive economic losses to the U.S. economy for the next decade, including $341 billion indecreased economic output, almost $68 billion in wage cuts, and initial lossesof over 154,000 jobs in 2011.”
(LSU Endowed Chair of Banking Joseph Mason, “Regional andNational Economic Impact of Repealing the Section 199 Tax Deduction andDual-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 UnitedStates finds itself at the bottom of the competitive pile … If you reducethe activities of U.S. companies internationally, then there must be long termreduction in the income that can be repatriated. Interestingly, when we thinkin terms of political support, it is often the oil and gas industry or theresources industry generally that is a leader in terms of entry into newcountries and in terms of reestablishing diplomatic ties. The resourcesindustry tends to be in the vanguard.”
(IHS CERA Chief Energy Strategist David Hobbs, BrookingsEvent, 9/27/2010)