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  • Obama's Attack on Big Oil: Fair Share or Targeted Tax Hike?

    President Obama says he wants big corporations, including oil companies, to pay their “fair share” in taxes. His deficit reduction plan includes eliminating what he calls special loopholes and subsidies for oil and gas companies—despite the fact that they’re not specific to the oil and gas industry but the broader manufacturing sector. If the President wants to collect more money from the oil and gas industry, he should support increasing access to America’s energy resources. This would greatly increase the amount of revenue coming into the federal government, and it would do so without raising taxes.

    If Congress opened access and placed a freeze on environmental regulations and the Administration moved to effectively permit new projects, the federal government would collect more than $36 billion as soon as 2015 and more than $800 billion by 2030, according to a study from Wood Mackenzie. The general economy would stand to benefit tremendously: Increased production would generate more than 1 million jobs by 2018 and more than 1.4 million jobs by 2030. President Obama’s “Living Within Our Means and Investing in the Future” plan ignores this sensible idea.

    Instead, the President’s plan for economic growth and deficit reduction proposes to eliminate what he calls special tax breaks for the oil and gas industry. Most of what the President and anti-oil crusaders label as oil subsidies and oil tax loopholes are not tax treatment specific to the oil and gas industry. These are broad tax policies that apply to many industries. For instance, the tax credit under Internal Revenue Code Section 199 goes to all domestic manufacturing. Producers of clothing, roads, electricity, water, and many other goods produced in the United States are all eligible for the manufacturer’s tax deduction. Even Hollywood and The New York Times can take it.

    By removing oil and gas production eligibility for this broad tax credit, the President is imposing a targeted tax hike, not closing a tax loophole. In fact, Congress already imposed a tax hike on oil and natural gas companies by freezing the deduction they can take at 6 percent, when other manufacturers receive a 9 percent deduction. Other proposals in the plan unfairly target the oil and gas industry, such as removing accelerated depreciation despite the fact the President is championing temporary 100 percent expensing. The best solution would be for Congress to make immediate expensing permanently available for all business investments.

    With respect to oil and gas activity, the one part that does make sense in the White House’s deficit reduction plan is to end Department of Energy research for fossil energy. In the plan it says, “These R&D activities have historically funded development of technologies that can be com­mercialized quickly, and are thus activities which should instead be funded by the compa­nies that benefit from the projects. Mandatory funding for this program sunsets in 2014. Repeal of this program, effective for 2012 and beyond, will save $150 million over the 10-year budget window.”

    The acknowledgement that the federal government is engaging in commercial activities that are best left for the private sector is an important one, and the U.S. could save billions more if it removed the Department of Energy’s role in all commercial activities that have evolved well beyond the scope of basic research and development.

    Ending all energy subsidies, including those for oil and gas, would be good for American taxpayers and consumers. The way to help the energy consumer is not with targeted tax hikes but by allowing access for exploration and production that will create jobs and lower prices. Doing so will also accomplish the goal of having more money come into the federal treasury—from rent, royalties, and lease payments, not from punitive tax hikes.

    Posted in Energy, Featured [slideshow_deploy]

    9 Responses to Obama's Attack on Big Oil: Fair Share or Targeted Tax Hike?

    1. Bob Wilson says:

      Why not just eliminate the Department of Energy itself??

    2. Helen says:

      I agree with Bob Wilson, eliminate the Department of Energy! I believe this dept. was started under the Carter administration to solve our energy problems and all they have done is create more entitlements and government regulations that are unreasonable. We are no closer to becoming free of our dependence on foreign oil because those in power want it that way. Let the market choose who survives and who doesn't, not BIG GOVERNMENT!

    3. Lloyd Scallan says:

      Ending oil and gas subsidies would be "good for American taxpayers and consumers"? Has the author lost his mind? Without "subsidie" do you realize what that would do to "exploration and production" oil companies budgets? The effects would filter all the way down from the actual drilling operations to the price at the pump. The amount of job loss would be astronomical. I agree some subsidies need to be eliminated. But the ones that are applied to oil and gas, will adversely effect every part of our lives. In almost ever product we use in today's life, oil is a major component. Removing oil and gas subsidies will cripple our economy faster that most anything eles Obama can do. Maybe that's why Obama wants to do it. But why does this author, working for HF, endorses such as disasterous plan.

    4. Mike, Wichita Falls says:

      When you prune a bush, it comes back even stronger than before, but when you pull it out roots and all, it never comes back.

    5. Mutantone says:

      If we do not drill for Oil and Gas here then his friend Soros gets the money from his oil and gas operations

    6. TimAZ says:

      Certainly the regime would love nothing more than to hike taxes on fossil fuels. This congress is not in D.C. to make Mao-Bama's fantasies of destroying the fossil fuel industry reality. They can stab big oil with their steely knives but they just can't kill the beast. They've been trying this since Arco started construction on the Alaskan pipeline. They failed then and they will fail again. We certainly need to end all subsidies for green energy. I have no doubt that green energy subsidies will have to be ended shortly after the 2012 election as part of the task to Down size our govt. foot print and bring spending under control. Think of it as giving the regime the stink eye on their way out the door.

    7. bagofwater says:

      It's a targeted tax hike. Oil and energy companies already pay far more in taxes than most, particularly ones in the pocket of this administration.

      None of these temporary politicians is ever around to feel the real effect of the imbalances they create in markets through their discriminatory taxation policies. Then the next round of politicians just attacks some other industry or class to address the problems created by the group before them.

      Either raise taxes on everyone, or no one.

    8. MSMII says:

      The cost of oil is currently around $85.92 per barrel, $1.56 per gallon. The rule of thumb has it that we should be paying about $2.56 per gallon at the pump. Why are we paying as if the cost per barrel were $143 not the $85.92 it is today?

      With the current price of $85.92 per barrel, the actual cost of the oil is $58.42. The cost of refining that is $11.17. The taxes, give to Caesar what is Caesars’, comes out to be $10.31. The marketing and distribution portion of this comes to $6.01 per barrel.

      The FTC feels that Price Gouging is afoot, and so do I. http://msmignoresit.blogspot.com/2011/09/price-of

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