As the tide of public opinion seems to shift in favor of House Republicans' demand for a vote on domestic energy exploration, one supporting argument has yet to be discussed: drilling as a way to lower your taxes.
Opening our vast domestic resources, both on- and off-shore, to responsible oil and gas development would produce an influx of tax revenue from additional lease sales and royalties, as well as from income and excise taxes. These additional collections could be used, for example, to offset the alternative minimum tax (AMT).
The Congressional Research Service recently estimated the potential federal revenue from Arctic National Wildlife Refuge (ANWR) oil development at $191 billion over 30 years -- roughly $18.36 per barrel, based on projections of recoverable reserves. Applying that formula to the 107 billion-plus barrels of recoverable oil that federal agencies estimate is in ANWR, the nearby National Petroleum Reserve and offshore tells us that sensible drilling could yield nearly $2 trillion in overall revenue over 30 years, or an average of about $65.5 billion per year.
Meanwhile, the "cost" in lost tax collections of protecting 22 million families from the AMT this year stands at about $62 billion. That figure is sure to balloon in the future as more and more Americans are ensnared by the complex system. Tax-hungry politicians defend the AMT by pointing to all the federal revenue that would be lost by ending it. (Never mind the fact that AMT revenue is ill-gotten in the first place, or that the estimated "costs" of its repeal to the federal budget ignore the benefits to economic growth and resulting additional revenues.) While oil and gas development won't fill government's coffers overnight, it will provide a down payment in the near-term, and big windfalls in the out-years that can help deal with some of the most intractable tax problems we face.
We helped create our energy supply problem by putting resources off-limits. Let's develop those resources and use the revenue to help alleviate tax burdens in this difficult economy. More supply, lower gas prices, greater energy security, and lower taxes. What are we waiting for?
This article appeared in the Wall Street Journal on Aug. 16, 2008.