EnergyFactor By ExxonMobil | Pespectives has a new home

Another year, another energy tax hike proposal

“This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.”

This statement came from President Obama’s State of the Union address just a few weeks ago, where he promoted the growth of oil and natural gas production as part of pursuing “American-made energy” for the United States.

Despite the rhetoric, the administration’s 2013 budget proposal seems to suggest that oil and natural gas aren’t really part of this “all of the above” strategy.

The 2013 budget proposal is a near-repeat of last year’s misguided proposal when it comes to the U.S. oil and gas industry, amounting to a massive $85 billion energy tax hike. It proposes repealing several economy-wide tax provisions specifically for the oil and gas industry, including those that exist to promote U.S. manufacturing and keep U.S. companies competitive overseas.

Such actions may appeal to people such as Senator Bernie Sanders and others, who continue to falsely label these tax provisions as “subsidies” for our industry (or worse yet, continue claiming we don’t pay taxes at all even after being proven wrong on multiple occasions).

But such actions don’t appeal to Americans who are looking for more job creation, more economic growth and more affordable energy to power such progress.

Take, for example, one of the budget proposals that takes aim directly at the oil and gas industry: modifying the tax rules for dual capacity taxpayers. This tax rule exists to make sure that U.S. companies can operate in other countries without being taxed twice – once by the host country and again at home. It helps to level the playing field when American businesses compete with non-U.S. companies whose countries have similar rules to make sure their home companies can compete abroad.

The dual capacity rule is not even considered a “tax expenditure” by the U.S. Treasury, nor by the Congressional Joint Committee on Taxation. Yet it’s repeatedly called an oil and gas “subsidy” by those who want to remove it.

So what would happen if U.S. oil and gas companies were excluded from this rule (and therefore subject to double taxation)?

A study of oil and gas company competitiveness in 10 major countries conducted by IHS-CERA found that “[P]otential new rules to restrict credits for foreign taxes already paid to a host government, currently under discussion in the United States, would make the United States the least competitive among the analyzed peer group, excepting India.”

That means that companies headquartered outside the United States, such as BP, Shell and Total, as well as national oil companies like those in China or Venezuela, would have the upper hand on bidding for projects around the world and creating the jobs that go with them.

Among the “least competitive” is not where this country should ever be. But that’s where we could be if our leaders continue to advocate punitive taxation for energy companies.

If policymakers are truly serious about economic growth and deficit reduction, then there is an alternative to punitive energy taxes: Put our industry to work. Put the policies in place that let us safely develop U.S. energy resources for the benefit of American consumers; contribute more government revenue through increased energy production; and compete for projects overseas that create jobs in the U.S. and produce returns for our shareholders, the vast majority of whom are in the United States.

A real “all of the above” strategy does all of these things – and the oil and gas industry is ready to play its part.

  • Worth a deeper look...