Higher Energy Taxes Hurt Families, Squeeze Investment

News
November 29, 2012
Investors Business Daily
 

This year's election cycle has featured a heavy dose of misplaced criticism towards U.S. corporations for profits made during a time when so many Americans are unemployed or underemployed.

Yet there's been little discussion of the private sector's contributions to the U.S. economy.

In the first presidential debate, President Obama claimed it would benefit the economy if the government were to end "corporate welfare" toward the oil and natural gas industry. Politicians have a long record of picking winners or losers to serve their campaign rhetoric, however the president's statement does not align with the facts.

A rise in energy taxes — as the White House has proposed — would only place an even greater burden on American families, resulting in less money reinvested in developing American energy, higher prices and less government revenue. A recent study by Wood Mackenzie found that an increase in taxes on energy producers would also result in fewer jobs and less GDP growth.

Not only is the energy sector investing in America, but they contribute more money in taxes than their actual profits to fill the American government's empty coffers.

According to a recent article in Forbes, ExxonMobil already pays three dollars in taxes for every one dollar of profit it receives in the United States. The current economic situation of the U.S. would be much worse, if not for needed government revenue from the energy industry.

The truth is that the industry's record of domestic investment extends to human capital. Today the oil and gas industry is responsible for more than 9.2 million jobs in the U.S. and contributes over 7.7% of the country's GDP.

A study produced by IHS-CERA, co-sponsored by the U.S. Chamber of Commerce's Institute for 21st Century Energy, suggests that shale oil and gas development alone has helped create 1.75 million U.S. jobs in the last few years and that domestic energy could add another 2.5 million jobs by 2015 and 3.5 million by 2035.

Additionally, the study shows that shale energy was responsible for $62 billion in federal, state and local tax revenue in 2012.

Penalizing the oil and gas industry, which has made contributions to the economy despite head winds like overlapping regulations, weak demand and competition from nationalized companies, is a recipe for a 20th century economy, not a 21st century economy.

Repealing standard tax provisions for oil and natural gas producers would have unintended consequences. The Public Policy Institute recently highlighted a list of companies, aptly named "Investment Heroes," who are investing in the U.S. at top-dollar amounts.