There’s an interesting shell game playing out in Washington. Last night, Speaker Boehner seemed to imply that oil companies are not paying their ‘fair share’ in taxes. While his spokesman is ferociously back-peddling on the statements, President Obama immediately jumped on the comments. Today, he sent a letter to the House and Senate asking lawmakers to join himself and Speaker Boehner in stripping the oil and gas industry of the ability to deduct business expenses from their taxable income, an ability granted to every other American industry.
Overnight, the Speaker’s careless, baseless comments re-energized the debate on raising taxes on the oil and gas industry. As usual, the discussion is being polluted by baseless talking points and unfounded claims. With so many allegations being thrown around, it is important to separate fact from fiction.
President Obama and his anti-energy allies claim that oil companies are sucking up billions of taxpayer dollars while earning record profits. Unfortunately for the President, this story is completely false. This fairy tale is a desperate attempt by President Obama to deflect blame for rising gas prices which are racing towards five dollars per gallon.
Basic knowledge of the energy industry would inform President Obama that oil companies lose over 40 percent of their net revenue to income taxes. Those taxes are in addition to the rents, royalties, and other fees paid to the U.S. government – a combined $86 million dollars every single day of the year. After all of their bills are paid, these companies have a profit margin that ranks 44th against other industries.
President Obama is not targeting the cash subsidies that his politically-favored ‘green’ companies receive. He’s instead going after business expenditures that the IRS allows companies to deduct from their taxable income. This practice is common across all U.S. industries, but the President wants it stripped exclusively from the oil and gas industry. If they are barred from deducting business expenses, oil and gas companies’ taxes will naturally rise.
The President and his allies are focused on breaking the legs of the oil and gas companies that employ millions of Americans and fuel our transportation sector. The Obama tax increases are projected to decrease American oil production by 400,000 barrels per day by 2025. Whether President Obama realizes it or not, decreasing the productivity of U.S. companies will only make us more dependent on state-owned oil companies in hostile regions of the world. In essence, unilaterally raising taxes on American energy companies subsidizes those state-run companies that are hostile to American values and our way of life.
Meanwhile Obama hands out billions of taxpayer dollars to wind and solar companies that still contribute less than a combined two percent of U.S. energy production. Not only have they received free money from the U.S. government, but lawmakers in Washington and state capitols craft laws to force Americans to use those forms of energy. Anti-energy activists claim that this special treatment for ‘green’ energy is necessary to get the industry off the ground. However, they ignore the fact that solar and wind companies have been subsidized since before the Carter Administration. Still, these energy sources have failed to deliver any measureable benefit to American taxpayers.
The Obama Administration’s strategy of singling out the oil industry is disingenuous. If they want to prevent energy companies from deducting expenses from their taxable income, the same practice that is used in every other industry, then they should apply those rules to all energy companies. The government’s job is not to choose winners and losers, but rather to ensure a level playing field.
If the Obama Administration is truly interested in American energy policies that reward the most productive, efficient, technologically-advanced companies and punishes those who cannot keep up, all they need to do is get out of the way. Lawmakers should put an end to all energy subsidies and apply the same tax rules to all energy companies. Then, allow for competition among these companies so that the only survivors are not those who hold the most sway in Washington, but rather those who best satisfy consumers.
Speaker Boehner deserves credit for re-emphasizing his opposition to raising taxes on energy companies. But, unfortunately, his gaffe gave President Obama an opportunity to energize his plans to raise taxes. Instead of concentrating on how to best avoid blame for skyrocketing gas prices, the President should instead focus on garnering support for energy policies that support job creation and lower energy prices for American consumers.