DearMember of Congress:
On behalf of the 362,000 members ofthe National Taxpayers Union (NTU), I urge you to oppose S. 940, the misleadinglynamed “Close Big Oil Tax Loopholes Act.” Introduced by Senator Menendez (D-NJ),this bill would single out oil and natural gas companies for harsh taxincreases that would threaten higher energy costs as well as endanger countlessjobs.
Oil and gas companies have long beeneasy targets for tax hikes, chosen not for the wisdom behind the policy, somuch as to pursue a misguided political narrative. For instance, in 1980Congress passed a “windfall profits tax,” designed to capture the resentmentAmericans felt at the high cost of oil. As with so many tax schemes arising outof transient economic phenomena, the “windfall profits tax” became defined byits adverse results. According to the Congressional Research Service, the taxcaused a measurable decline in domestic production and a rise in imports,factors that ultimately led to its repeal in 1988. Sadly, the tax hikescontained in S. 940, being sold under the guise of eliminating subsidies,indicates that the lessons of the 1980s were not learned.
Among S. 940’s harmful provisions area repeal of the manufacturing deduction under Internal Revenue Code Section 199and the “dual-capacity” tax. Although many in Washington have artfully labeledthese as “oil subsidies,” they are broadly available deductions aimed atcreating jobs and preventing dual taxation. In fact, oil and natural gascompanies only receive a 6 percent deduction under Section 199, while otherdomestic companies, from filmmakers to t-shirt manufacturers, enjoy a 9 percentdeduction. Likewise, the “dual-capacity” protections are not industry-specific,and are designed to ensure that our domestic businesses are not double-taxed onincome already taxed abroad. These and other provisions serve as tools to encourageinvestment, maintain our global competitiveness, and ensure affordable domesticenergy production.
Although it is clear that thislegislation was aimed at the caricature of oil companies, the realities of theindustry highlight the discriminatory impact the legislation will have.According to the American Petroleum Institute, oil and natural gas companiespay effective tax rates of more than 41 percent and have smaller profit marginsthan other manufacturers. Therefore, without comprehensive reforms to thecorporate tax system, this legislation amounts to little more than apolitically convenient ploy that would hurt one of our economy’s most importantinputs. For the aforementioned reasons, NTU urges all Members of Congress tooppose S. 940, the “Close Big Oil Tax Loopholes Act.”
Sincerely,Brandon GreifeFederalGovernment Affairs Manager108 North Alfred Street Ø Alexandria,Virginia 22314 Ø Phone: (703)683-5700 Ø Fax: (703)683-5722 Ø Web:www.ntu.org