Instead of confronting Washington’s over-spending problem, President Obama looks to punish America’s most productive job creators—energy producers. By repealing tax credits and deductions regularly employed by America’s oil, natural gas, and coal producers, the President is effectively advocating for higher energy costs, fewer jobs, and slower growth.
When asked to justify the nearly $90 billion in tax increases on America’s oil and natural gas producers, the President and the Left claim that oil and natural gas producers are the beneficiaries of “tax subsidies” or “tax expenditures.” If oil and natural gas producers are exploiting the tax code, it is hard to tell—the effective tax rate for the oil and natural gas industry is 48 percent compared to 28 percent for the rest of Standard and Poor’s industries. This high tax rate explains why in 2008 America’s oil and natural gas producers paid $100 billion in income taxes. In fact, every single day this industry pays $95 million to the federal treasury in rents, royalties and lease payments.
Furthermore, the President and his lackeys over at the Center for American Progress seem to have misunderstood the meaning of the words subsidy and tax expenditure. A subsidy is when you take money from John and give it to Mary—the foundation of the Democratic Party’s economic and social policy. Allowing John to keep more of his money by letting him employ a tax credit or deduction is not a “tax expenditure.” How could it be? no money is being spent.
Those looking to understand what an energy subsidy is should look no further than Obama’s stimulus package. After all, it was this piece of legislation which provided $17 billion in direct grants for renewable forms of energy.
The current system of credits and deductions is less than ideal but is necessitated by the high levels of taxation currently in place; America’s corporate income tax is the highest in the world. Businesses and families would certainly prefer a simplified tax code with no credits or deductions but insist that reform is done in at least a revenue neutral way.
President Obama’s budget is entirely unserious. It calls for $1.5 trillion in tax hikes and $8.7 trillion in new spending over the next decade. It does nothing to address America’s impending entitlement disaster. With unemployment hovering around 9 percent, you’d think the president would abet America’s oil and natural gas producers—an industry which employs 9.2 million Americans—not demonize them.
Christopher Prandoni serves as a Federal Affairs Manager of Americans for Tax Reform (ATR). He is also the Executive Director of the Alliance for Worker Freedom (AWF), an organization that combats anti-worker legislation and promotes free and open markets.
