Higher Energy Taxes No Solution to Washington Fiscal Mess

Let me break it to you, the oil and gas industry is not subsidized – that is, they don’t receive direct government payments to augment their revenue stream

By Brad Johnson

As the summer driving season heats up, time is winding down for Congress to fix the ailing Highway Trust Fund. Though, in usual fashion, the outcome will almost certainly be another temporary patch rather than a long-term solution.

Maybe that’s a good thing, with President Barack Obama and his allies in Congress continually proposing to hike taxes on America’s oil and gas producers as a way to fix whatever fiscal boogeyman they’re focused on at the moment.

Of course, they don’t come right out and admit what they’re up to. Instead, we hear phrases such as “closing loopholes” or “eliminating subsidies” to mask the truth that these are outright tax hikes.

Let me break it to you, the oil and gas industry is not subsidized – that is, they don’t receive direct government payments to augment their revenue stream. The industry does, however, get the same sorts of tax deductions and credits that businesses (and individuals) of all stripes receive. They get to write off the cost of doing business — otherwise they probably wouldn’t be in business.

Only in the warped world of Washington, D.C. could someone get away with equating a run of the mill tax deduction with a real government subsidy. But that’s exactly the type of rhetoric we hear almost daily when it comes to the oil and gas industry.

By way of example, all American companies involved in manufacturing or production are allowed to deduct their production costs through the Section 199 tax deduction. Repeatedly, Washington politicians have proposed eliminating Section 199, but only for the production activity of oil and gas companies.

There’s danger in accepting the “subsidy” rhetoric. Singling out oil and gas for disparate tax treatment by taking away those common deductions and credits would mean increasing the cost of energy for all consumers. Doing so would simply be a tax increase that we’d all end up paying.

Sticking our oil and gas industry with an even larger tax burden couldn’t come at a worse time. Right now the industry is booming and we’re more energy-self-sufficient than we’ve been in over 25 years.

All that oil and gas activity is driving tremendous job growth. And not just any jobs, but high-wage, good-benefit, career type jobs in exploration, transportation, manufacturing and more.

We certainly know that to be true in Montana, where job opportunities in the Bakken have reached near-legendary proportions.

The economic boost energy production has given our state is felt in every community. Tax revenue connected to oil and gas development gets distributed to every school district and local government in the state. And job opportunities in the eastern part of the state have relieved unemployment as far away as Libby and Hamilton.

But the congressional proposals to increase taxes on energy producers would throw a big bucket of cold water over all of that.

Higher taxes on energy producers is not a realistic solution to fix the problems with the Highway Trust Fund or any of the other myriad fiscal holes our federal government has managed to dig.

I hope you’ll join me in urging Montana’s Congressional delegation to continue to oppose higher taxes on our important energy industry.

Brad Johnson is Montana’s former secretary of state

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