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Taxes, Energy and the Economy

As a new administration and Congress settle in, policymakers should resist whatever inclination there might be to raise taxes on U.S. energy companies. For starters, the overwhelming majority of U.S. voters think it’s a bad idea. Harris Poll surveyed actual voters on election night, asking whether they support or oppose higher taxes that could negatively impact domestic energy investment and development – 72% opposed.  In a world where partisanship is growing, opposition to higher energy taxes is consistent across the political spectrum.

Most Americans probably recognize that energy tax policy can have as much impact on U.S. energy security as other factors, such as access to reserves and the regulatory environment. They may not know that our industry already contributes about $70 million a day on average to the federal government in taxes, rents and royalties. From 2011 to 2015, oil and natural gas income tax expenses (as a share of net income before income taxes) averaged 37 percent, compared to 25.8 percent for other S&P Industrial companies.

The overarching point is that industry already is a significant contributor to the federal treasury – more than most sectors. The better idea to raise revenues for government is to implement pro-development energy policies that foster increased industry activity that will generate more tax receipts, rents and royalties.

Higher energy taxes are an obstacle to oil and natural gas production that now leads the world, surging domestically thanks to development of energy-rich shale deposits using modern hydraulic fracturing and horizontal drilling. America’s energy renaissance has boosted the economy, increased U.S. energy security, lowered carbon emissions and raised this country’s standing in the world.  The right course – for U.S. energy, economic growth and security – is to sustain and extend America’s energy renaissance with policies that encourage safe development, while also increasing revenues to governments at all levels.

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