Obama's Tired Attack on Oil and Gas

Leaders must recognize the political and economic peril of levying new taxes on oil and gas.

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U.S. could soon produce more oil than it imports from abroad.
The U.S. could soon produce more oil than it imports from abroad.

Pete Sepp is executive vice president of the National Taxpayers Union.

Last week, in a narrow 50-49 vote cast after nearly 20 hours of debate, the United States Senate passed a budget resolution, marking the first time that the higher chamber has accomplished this basic task of government in four years.

Lawmakers of both parties agree the passage of a budget is—in strictly technical terms—a step in the right direction for the Senate. At least it demonstrated that the chamber is, despite all indications to the contrary, capable of passing legislation. Practically speaking, though, this progress is less profound than meets the eye.

The resolution approved by the Senate lacks the power of statutory law. The hundreds upon hundreds of amendments were offered to make broad statements, serve as narrow symbols, place markers on future policy debates, and resurrect past political grudges.

Some of the amendments were significant enough to merit several Vote Alerts, such as this one and this one, from my organization. One pleasant outcome was adoption of a provision showing that a filibuster-proof majority of Senators support construction of the Keystone XL pipeline. A decidedly disappointing outcome was enactment of a measure designed to promote the “Marketplace Fairness Act,” a scheme that would empower states to aggressively collect sales taxes beyond their borders.

[See a collection of political cartoons on the budget and deficit.]

Yet, despite all of the theater, some of the biggest policy implications for the Senate budget were left largely unspoken. The resolution as written calls for nearly $1 trillion in new taxes (some sources say much more), but it remains mostly mum on the specifics surrounding the source of that revenue. This is by design, as the details of what it will take to raise $1 trillion in new taxes were sure to make it harder for Democrats seeking re-election in 2014. Senate Democrats, in other words, advanced a document that was politically pragmatic—even if it was also deliberately evasive.

The White House, on the other hand, takes a different but no less troubling tack. With the president slated to release his own budget in early April, we're likely to see just how damaging the specifics of raising hundreds of billions more for federal coffers could be. Some proposals have been well-publicized from previous budgets—higher tax rates for upper-income individuals (in addition to those enacted in January) or caps on charitable giving deductions, for example. Others—like long-sought discriminatory tax hikes on American oil and gas companies—are less prominent, but threaten our economy in much the same fashion.

The White House, unlike the Senate, has issued a new budget each year and, like clockwork, has singled out our nation's oil companies for billions of dollars in new taxes. The effort hinges on the false logic that these firms are scofflaws that do not carry their share of the tax burden and are the root of our nation's budget quagmire. Relying on these disingenuous claims as the basis of tax law is unproductive at best and intentionally misleading at worst.

[See a collection of political cartoons on the economy.]

The oil industry is taxed more heavily than most other sectors of our economy—an average of almost 42 percent compared to 26.5 percent for the rest of the S&P Index. Three of the nation's top ten taxpayers are oil and gas companies. ExxonMobil pays more in income tax than any other enterprise, followed by Chevron. To call such a tax contribution disproportionately small is to knowingly obscure this reality and ignore another one: That hiking taxes on this industry would threaten one of our nation's most steady and reliable job creators.

The oil and gas industry is one of the few sectors of our economy that has consistently provided employment opportunities throughout our long-running economic downturn. In 2011, the industry added close to 150,000 new jobs. That's almost 9 percent of all new jobs added in the United States during that time frame. All told, the industry has steadily supported almost ten million American jobs.

[See a collection of political cartoons on energy policy.]

Just as important, tax hikes like these, mostly focused on taking away provisions commonly used by other types of businesses, move in the opposite direction of tackling the two most critical challenges facing fiscal policymakers today: Across-the-board tax simplification and spending restraint.

Pragmatism demands that leaders recognize the political and economic peril of levying new taxes on the oil and gas industry. Unfortunately, pragmatism has never been President Obama's strong suit. It's time for our leaders to abandon punitive tax policy that does nothing to fix the budget mess. It's time to Stop the Tax Attack.

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