Michael Lynch is the president and director of global petroleum service at Strategic Energy & Economic Research.
President Obama has made raising oil company taxes a centerpiece of his energy speeches and specifically cutting the tax breaks that they receive. He expresses amazement that some would oppose reducing the tax breaks on such wealthy entities, but it is hard to see this as anything more than penalizing the politically unpopular in a grossly unfair manner.
The petroleum industry is currently very profitable, at least the upstream oil industry. But aside from the fact that they are cyclically profitable, other sectors like agriculture that are booming are not being targeted for additional tax revenues. Income taxes do not vary by industry, because that would be considered unfair. Steel, auto, oil, and computer companies all are subject to the same tax rates, and organic farmers or hemp clothiers do not have separate tax tables.
Granted, the oil industry gets tax breaks: everybody does. One of the two tax breaks being discussed is a break for industries that manufacture in the United States, and Obama is suggesting that only the oil industry not receive this, which is hardly "fairness." Reform of tax breaks has much appeal, but should be done broadly, not piecemeal. That is how our tax system became burdened with exceptions and loopholes in the first place.
And think that's not the case here? The farm sector is making huge profits right now, but no one is suggesting raising farmers' income taxes, either at the individual or corporate level. And if taxing the rich is so politically acceptable, why are there huge tax breaks for electric vehicles, which are, after all, only affordable for the rich?
Overall, the suggestion that everyone should receive tax breaks except the oil industry harkens back to medieval Europe when kings presented special tax bills to political enemies. The great political philosopher Huey Long once said, "Don't tax you, don't tax me, tax that fellow behind that tree," to illustrate the typical attitude towards "fairness," but he was speaking facetiously.
Tax reform, higher taxes, and even increased taxes on types or levels of income might be necessary and even acceptable as means to reduce our budget deficit, but the notion that a sector which is having a profitable year should be targeted for special treatment runs counter to the philosophy which underlies our tax system.