Government Bytes


Troubling Contradictions: Obama on Energy Taxes in his State of the Union

by Pete Sepp / /

In the President’s address Tuesday night, sharp-eared observers might have noticed he took credit for growth spurred by the oil and gas industry, saying:

“And here are the results of your efforts: … A manufacturing sector that's adding jobs for the first time since the 1990s -- more oil produced -- more oil produced at home than we buy from the rest of the world, the first time that's happened in nearly twenty years.”

The President’s excitement over the accomplishments of the energy sector might come as a surprise considering he has consistently worked to make life more difficult for those businesses.

Now, he is taking credit for a natural gas boom that the EPA nearly strangled in its infancy and rather than let the private sector drive it further, he wants subsidized fueling facilities at a cost to taxpayers of $274 million annually.

What made his remarks on this during the State of the Union so startling, was that 15 minutes after this boast – the President (not for the first time) called for massive tax hikes on the industry whose accomplishments he just touted!

“Let's continue that progress with a smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don't need it so we can invest more in fuels of the future that do.”

The language itself is galling, as if the government created the wealth being discussed and “gives” it away because the tax code isn’t more punitive. But more specifically this short line in a speech means the continued success of a rare economic bright spot could be in jeopardy…

Given the President’s citation of the $4 billion a year number, he is apparently referencing several tired schemes to single out oil and gas for harsh treatment – including repeal of a write-off for taxes paid to foreign governments and a job creation deduction available to numerous other industries. We’ll likely also see a pitch for more “green” energy subsidies in coming weeks.

His stance further endangers the systemic tax reform process, which is building bipartisan steam in Congress. Commendably, the President called for a comprehensive overhaul of the tax laws, one that emphasizes lower rates and a simplified base. Yet, he also proposed to “take the money we save from this transition” and plow it into more government projects.

The notion that the Treasury “saves” money by taking it from the private sector is problematic. Plus, targeting oil and gas would make the Tax Code more, not less, complex.

Obama is acting as if he can continue proposing the very policies that would have killed America’s energy renaissance, and still have economic gains to falsely take credit for the next time he makes such an address.

The trouble is, sending signals like these can do damage, not only to the economy but the cause of tax reform too … and, most ironically, to the Treasury’s bottom line.