Stephen Comstock's remarks at press briefing teleconference on tax polling
As prepared for deliveryPress briefing teleconference on tax polling
Stephen Comstock, API director of tax and accounting policy
Tuesday, October 29, 2013
Opening statement as prepared for delivery:
Good morning everyone, and thanks for calling in.
New polling conducted for API by Harris Interactive shows that American voters see great value in a strong domestic energy sector. Nine out of ten respondents said that developing more domestic energy here in the U.S. is important, and 73 percent support increased access to domestic oil and natural gas resources.
Unfortunately, discussions taking place in the nation’s capital could threaten to put the strength of American energy at risk.
Whenever the debate in Washington turns to spending and debt, a few politicians repeatedly haul out proposals for punitive tax increases on oil and natural gas. This is not a popular idea, according to our polling, which found that 81 percent of voters nationwide believe politicians in Washington should solve the country's budget issues without raising energy taxes.
This may be because Americans naturally see a connection between energy taxes and energy prices. According to the poll, 69 percent of voters agree that increasing energy taxes, such as taxes on oil and natural gas companies, hurts everyone because those tax increases could drive up energy costs for consumers.
Many Americans are also likely aware that oil and natural gas have been a bright spot in an otherwise slow growth economy. After all, the domestic oil and natural gas industry created jobs 40 times faster than the broader economy from 2007 to 2012, according to the Energy Information Agency.
Tax reform is another area where voters are wary of the potential for harm to U.S. energy production and energy security.
When asked about tax reform, 56 percent of voters said they oppose changes to the tax code that could decrease investment in energy production and reduce energy development in the U.S. versus just 30 percent who said they would support such actions.
At API, we believe tax reform could help keep America competitive in a global marketplace, but we also know it must be done carefully.
Cost recovery measures, like the deduction for intangible drilling costs or IDCs, are available to every business in America. The IDC deduction allows oil and natural gas companies to recoup labor and other costs spent on drilling a well. By improving cash flow, the deduction allows companies to invest more money into creating jobs and producing the energy that keeps our economy running.
For some companies in the retail and service sectors, reduced marginal tax rates might outweigh the loss of deductions that allow a business to recover costs. But for capital-intensive industries like energy and manufacturing, cash flow and cost recovery will typically be very important factors in how they decide to invest in their operations.
A study released this summer by Wood Mackenzie shows that repealing IDC would result in fewer wells drilled, fewer Americans employed, and less energy produced here in the U.S. This impact is both significant and immediate.
190,000 Americans would be unemployed next year if the IDC deduction is repealed, growing to 265,000 jobs lost over a decade, according to the study. With nearly 10,000 fewer wells drilled and $407 billion in decreased investment, domestic oil and natural gas production would fall 14 percent below current expectations after 10 years.
That kind of impact would be almost impossible to offset just by lowering marginal tax rates.
It’s no secret that policymaking in Washington can sometimes be a mess, with unwelcome consequences that were never intended. In the same way, tax reform that damages cost recovery measures like IDC in order to pay for lower rates could unintentionally hit the brakes on America’s energy and manufacturing renaissance.
Energy is working in America, and API and our 15 million strong and growing network of grassroots activists are encouraging policymakers to keep that in mind.
Just by allowing our industry to do what we do best, government collects average revenues of $85 million a day. We pay our fair share and then some while providing energy to families and businesses and supporting millions of jobs throughout the economy.
If the federal government allowed greater access to domestic oil and natural gas resources – which our polling shows Americans strongly support – it could lead to even more revenue for the government and more energy and good-paying jobs for American workers.
That’s the kind of bipartisan solution that’s needed in Washington today.
Thank you again for calling in, and now I’ll be happy to take your questions.