Every time U.S. gasoline prices take a big jump, political opportunism rears its ugly head, and some congressional committee calls a hearing for the sole purpose of treating oil companies like a piñata. Sen. Menendez (D-NJ) even took one executive to task by for describing the Congressman’s proposed legislation to make the oil firms ineligible for tax deductions available to almost all other businesses as “un-American.”
Well … it is.
Discrimination is un-American. Providing equal treatment under the law and a level playing field for all competitors lies at the core of our country’s values. Yet, the proposal from Sen. Menendez and several of his Democratic colleagues conflicts with those very principles.
Sen. Orrin Hatch (R-UT) saw last Thursday’s spectacle for what it was, “a dog-and-pony show … designed to distract their constituents from the simple fact that the Democrats have no energy policy.”
Though Senate demagogues are always quick to point out how much revenue these companies earn, they fail to acknowledge large amount of money they invest to produce those profits. They also fail to mention that the industry’s earnings on sales are commensurate with other U.S. manufacturers.
Perhaps most notably, those pushing to hike taxes on oil and firms pointedly omit the high tax burden these companies already pay. Indeed, the U.S. EIA’s “Performance Profiles of Major Energy Producers 2007”* found in the 27 major energy producing companies surveyed had an effective tax rate of 40% compared with a 26% for all manufacturing companies.
The so-called tax “breaks” in question in the Senate debate involve a credit designed to incentivize U.S. investment and job creation, the ability to write off intangible costs related to exploration and production, and protection against dual taxation from foreign generated revenue already taxed by the host country.
These provisions aren’t special. In fact, they’re available to almost all other businesses.
Yet, Sen. Menendez and his cohorts are campaigning to repeal these rules just for traditional energy produces. The result? Our nation would suffer higher gasoline prices, less U.S. investment, and fewer employment opportunities. A 2011 CRS report warns “the proposals also would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.”
Our nation is confronted with serious economic problems because too many of our elected representatives are more interested in showboating, rewarding favored groups, and exercising discriminatory power than in the hard work of solving problems and using the market to promote sustainable economic growth.
The unlikeliest of political observers, Groucho Marx, once commented that politics is about looking for problems, finding them everywhere, diagnosing them incorrectly and applying the wrong solutions. That helps explain why we still lack rational energy policy.
*Released in December of 2008 and the last year for which the data was made available.