Obama Budget Raises Taxes on Oil and Gas Production
Monday Morning Report, February 21, 2012
Just weeks after President Obama said he would do everything to help expand energy production in the U.S., he reverses course and proposes additional taxes on domestic energy production.
President Obama’s 2013 proposed fiscal budget includes approximately $39 billion worth of oil and natural gas tax increases over 10 years. The President has been pushing his tax plan for years but votes in Congress have fallen short of the support needed to pass amid resistance from Republicans and Democrats with oil and gas production in their districts. The industry has lobbied fiercely to maintain the incentives.
The tax increases would raise an estimated $11.6 billion over a decade by ending the industry’s ability to claim deductions on domestic manufacturing income and an estimated $13.9 billion by ending oil companies’ ability to write-off intangible drilling costs, among other repeals.
The budget blueprint makes clear that the White House plans to use the proposal as part of its larger message on green energy. “Repealing fossil fuel tax preferences helps eliminate market distortions, strengthening incentives for investments in clean, renewable, and more energy efficient technologies,” the budget plan states. This absurd statement is in direct contrast to well-known economic principles that show the raising of taxes distorts market competitiveness. Instead of letting the market decide which energy source to use, the President wants to gamble on some future technology that may or may not come to market.
Jack Gerard, president and CEO of the American Petroleum Institute, responded immediately indicating that raising taxes on energy companies would affect job generation and drive oil and gas investments abroad. "After a handful of years, we would see less domestic energy production, particularly of natural gas, increase imports, fewer new jobs, and, eventually, depressed tax, royalty and other revenues," Gerard said.
