Against the backdrop of budget battles in Washington, the chattering class has spent a great deal of verbiage worrying about the damage the current "uncertain" policymaking environment has caused the business community. The recent spending and debt deal has done little to clarify this situation, as Congress and the president face a new series of fiscal deadlines over the next three months.
Unfortunately, the private sector has been afflicted with this problem for quite some time. Since 2001, almost 4,700 changes have been made to federal tax laws. The 2012 edition of the Federal Register, containing regulatory edicts affecting businesses and individuals, approached 79,000 pages (and has exceeded 60,000 pages each year for two decades).
Yet, despite these tremendous obstacles – and the need for policymakers to remove them – a new report published this fall shows that some leading companies are still managing to move forward with investments that will make America's future brighter.
The Washington-based Progressive Policy Institute released its annual "Investment Heroes" report and showed how "a high-growth strategy requires strong investment – private and public – in our nation's productive and knowledge capacities." To this author, "public investment" has all too often led to overbearing tax burdens and underwhelming results (see: 2009's "stimulus" package). Elected officials need to think smarter about such expenditures, sharpening pencils and using techniques such as life cycle cost analysis to deliver more value.
Yet, PPI's report makes an encouraging point: Combined, its 2013 ranking of the top 25 non-financial companies reported $149.8 billion of capital invested in America's economy.
PPI also highlighted the leading role that oil and natural gas production has on U.S. economic growth. "The shale oil and gas boom has turned old assumptions about energy scarcity on their head," the Institute contended. "It may also turn the United States into a major energy exporter, while creating jobs at home."
The energy sector led the way in PPI's study with $56.1 billion invested in the 2013 ranking, with eight of the top 25 companies from the oil and gas industry. "Energy will continue to be a driver of U.S. growth and job creation," the Institute projected.
At the risk of highlighting the obvious, we need to remind our policymakers in Washington that these critical investments in America's energy economy are only made possible when companies have sufficient resources left – after taxes, regulations and other government-induced overhead – to pour into new projects. A dollar taken away by Washington is a dollar that can't be invested in expensive new infrastructure – pipelines, drilling rigs, refineries and the like.
What we don't need is more of the politicization of energy policy we've been seeing for several years from President Obama and some quarters of Congress. The president has relentlessly pushed for higher taxes on domestic oil and gas producers, blithely noting that these companies are "doing just fine" and need to "pay their fair share."
The facts argue otherwise. A list of the top 10 largest corporate taxpayers in 2012 compiled by Forbes using data from FactSet Research Systems was led by ExxonMobil and Chevron, in first and second respectively, and included Conoco Phillips. These three companies alone paid $72.9 billion in taxes last year.
What's more, the energy industry paid an effective tax rate of 37 percent during the past five years, compared to the S&P average of 29 percent. Under what sense of tax "fairness" could we possibly single out energy companies for even higher rates, especially considering how important they are to new investment and job creation?
Under cover of "eliminating subsidies," President Obama has proposed raising taxes on energy producers by selectively denying them cost recovery provisions built into the federal tax code. If we're going to have true tax reform in this country, we won't get there by government picking winners and losers in the free market. Tax reform doesn't mean we demonize certain industries because it plays well with one party's political base.
Domestic energy producers are placing big bets on the upside potential of our nation. For example, the Keystone XL pipeline (build it!) would represent a $7 billion infusion of capital. The investments that energy companies are now making in liquefied natural gas export terminals – with four new terminals approved – is another encouraging development. Dominion Resources, Inc. wants to convert a liquified natural gas import terminal on the East Coast for export at a cost of $3.8 billion. The list goes on.
The "Investment Heroes" report is another reminder of why we need to look at our energy policy with a more farsighted perspective. Treating domestic oil and gas firms like scapegoats instead of standard-bearers will hurt all Americans in the long run.
Pete Sepp is executive vice president of the National Taxpayers Union (ntu.org).