Dear Chairman Hensarling andChairwoman Murray:
As you know, the 362,000-memberNational Taxpayers Union (NTU) has been an active participant in the currentdeficit reduction debate. Through our own efforts and through coalitions, wehave offered numerous recommendations stressing spending restraint and systemictax reform. The concerns we have been communicating include opposition tohigher aviation taxes, defects of a proposed dairy supply control scheme, andthe flaws of deceptively-named “rebate” proposals for Medicare Part D. Today,however, I write to caution you regarding a matter with which NTU is all toofamiliar: discriminatory taxes on energy.
In an open letter to yourpanel less than two weeks ago, 37 Members of the U.S. House of Representatives backedwhat will amount to a $90+ billion energy tax increase to achieve deficitreduction; another letter followedlast week from 14 of their Senate colleagues. Bothchambers’ communications argue that we “can no longer afford to give awaybillions of dollars every year to corporations earning billions ofdollars in profits and costing American taxpayers twice: at the pump andthrough the tax code.” As laden as this scheme is with political point-scoringpotential, it has been rejected in several forms during the current Congress,and for good reason.
For one, far from being a merecollection of “giveaways” to oil and gas firms, the provisions of law at issue includethose available to companies and industries of all kinds, chief among them theSection 199 domestic production activities deduction and the “dual capacity”credit against taxes paid to other entities on operations abroad. Repealingthese commonly-used laws for a subset of industry majors will not improve theefficiency of our Tax Code. Instead, it will raise taxes on an industry that alreadypays $86 million per day in taxes to the state and federal government. Whenexpressed as a total effective tax rate, analyses of data from Standard &Poor’s, the U.S. Energy Information Administration, and other sources show thatAmerican oil and gas companies shoulder a burden heavier than those in manyother sectors, often approaching 40 percent. A recent study by energyresearch firm Wood Mackenzie confirms that similar energy tax grabs, repurposedby the Administration various times throughout its term, could actually reduceoverall government revenuesby $29 billion through 2020 due to discouraged economic activity.
Interestingly, both letters definitivelystate that increased taxes on the industry will do nothing to raise the priceof gasoline, given that oil and gas prices are set at the international leveland the fact that United States production comprises just a fraction of globalsupplies. This reassurance is strikingly familiar to claims from proponents of theDodd-Frank financial reform bill and its provisions, including the Durbinamendment, that it would not raise prices for consumers. Yet, as a resultof the bill’s regulatory dictates, several institutions have announced plans toimpose fees on consumer debit cards. Regardless of particulars, a tax hike onoil and gas firms certainly won’t help to lower prices of gasoline. It is alsoquite likely that U.S.-based entities would be put at a disadvantage to foreigncompanies, resulting in reduced employment opportunities and lower returns tomillions of shareholders here.
There is a better way forward. In a recommendation submitted to your panellast month, the National Taxpayers Union and the U.S. Public Interest Research Group(U.S. PIRG) identified more than $1 trillion in spending cuts that would helprealize the $1.2 trillion reduction mandate. Although our groups have broaddifferences over tax and regulatory policy, including the oil and gas taxpolicies discussed in this letter, we were able to agree on more than $1trillion worth of wasteful federal spending. Indeed, one of the actions NTU andU.S. PIRG advised was to end the Ultra-Deepwater natural gas and petroleumresearch program.
Furthermore, wemust work to simplify the Tax Code across the board, rather than targeting aselect few individuals or companies for punitive treatment. As an NTU letter toCongress on several “disastrous debt reduction ideas” warned:
Revisitingdeductions and credits with an eye toward broadening the base and loweringrates across the board (i.e., systemic tax reform) could help U.S.competitiveness. However, singling out certain firms in one sector for punitivetreatment is simply a capricious tax increase – which will ultimately drive upprices at the pump, harm job-creation, and hurt our business position abroad.
Members of thiscommittee can demonstrate that Congress is willing to break from the past andput our nation’s finances on a more responsible, sustainable footing. Fewactions would signal this determination more clearly than for the committee toreject stale schemes to worsen the tax burden on oil and gas firms. Such proposals will cost jobs, lower domestic energyproduction, further mangle an already twisted Tax Code, and ironically, costthe government revenue over the long run.
As always, ourmembers stand ready to assist you in your deliberations.
Sincerely,
PeteSeppExecutiveVice President
cc:
Sen. Max BaucusRep. Xavier BecerraRep. Dave CampRep. James ClyburnSen. John KerrySen. John KylSen. Rob PortmanSen. Pat ToomeyRed. Fred UptonRep. Chris VanHollen