Singling Out Natural Gas and Oil for Higher Taxes is Bad Policy
Posted October 27, 2020
Three points about Vice President Joe Biden’s pledge, if elected, to deny the natural gas and oil industry the use of growth and investment provisions in the tax code that are available to virtually the entire U.S. manufacturing sector – basically, singling out our industry for higher taxes.
- Our industry is strongly invested in the U.S. economy, its infrastructure and workforce through spending today and in the future.
- The ability through tax deductions to recover costs associated with job creation and other operational investments is critically important to seed energy development in the future, to create new jobs and help drive economic growth.
- The U.S. natural gas and oil industry pays its fair share in taxes – and then some – while delivering safe, affordable and reliable energy that Americans count on every day.
Biden has talked about ending fossil fuel “subsidies” for some time (see here and here). It’s one of his go-to points on energy – along with his promise to halt new natural gas and oil leasing on federal lands and waters (see here, here and here).
Yet, legitimate tax deductions that encourage investment by our industry are the same or similar to those used by other businesses.
Our industry is eligible for ordinary deductions ensuring that companies are taxed only on real income. Businesses are allowed to write off legitimate expenses such as investments that generate tax revenue to the benefit of all Americans. Between 2013 and 2017 industry paid an effective tax rate of 34%, compared to 26.7% for the S&P industrials.
At the same time, severance taxes contributed more than $14 billion to state treasuries in 2019:
Now, turning to industry’s capital expenditures – company spending to develop energy for the U.S. – it’s axiomatic that taxing companies more will negatively effect on that spending. The last thing a recovery economy needs is the hamstringing of a key growth sector.
The Progressive Policy Institute’s top 25 investment heroes last year provides some scope to industry’s capital expenditures, with four natural gas and oil companies listed among PPI’s top 25 investment heroes. ExxonMobil, Chevron, ConocoPhillips and Energy Transfer together had capital expenditures of more than $30 billion in 2019. PPI:
Companies that invest in America are the lifeblood of economic growth. … [C]apital investment boosts productivity, raises living standards, and creates better-paying jobs. … We note that many of our Investment Heroes are the target of fierce criticism from policymakers and pundits who underestimate the importance of capital spending to American growth.
The natural gas and oil industry supports millions of U.S. jobs and generates billions in revenue for federal and state governments. Industry provides jobs that pay seven times the federal minimum wage and help reduce income inequality in America.
Smart tax policies recognize the natural gas and oil industry as an economic mainstay, a bellwether that has increased U.S. security in the world by making the nation less dependent on foreign energy. Smart tax policies create a level playing field for companies regardless of economic sector.
Bad tax policies dismiss the natural gas and oil industry’s significant economic and security benefits and single it out for tax increases – even as affordable, reliable energy is a foundation for the nation’s economic recovery from the pandemic.
Bad tax policies fail to acknowledge that natural gas is the chief reason the U.S. has reduced carbon dioxide emissions more than any other country since 2000 – and that by hiking taxes on the industry providing natural gas could impact that progress.
Certainly, rhetoric from a presidential campaign shouldn’t be confused with a governing policy blueprint. The natural gas and oil industry is integral the U.S. economy, its security and environmental progress – all points arguing against punitive tax policies that likely would negatively impact all of those areas.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.
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