Energy tax increase is wrong
May 07, 2009

Commentary by Missouri Rep. Walt Bivins (R-97)
St. Louis, MO

President Obama has outlined an ambitious plan for a massive redistribution of wealth and government intrusion into health care, education, energy, and the free market in general. He has made it clear that he intends to pay for some of his proposals on the backs of the energy industry and ultimately those families that really end up paying the bill.

In 2004, Congress passed the American Jobs Creation Act, which, among other things, reduced taxes for all businesses creating good-paying manufacturing jobs for American workers. The provisions included in Section 199 of the tax code which applies to all domestic businesses, but President Obama has singled out energy companies for a tax hike—confiscating billions of dollars from one of the few thriving sectors of the economy.

Many think the oil companies deserve to pay higher taxes, and this short-sighted approach may temporarily fund the government’s expansion of welfare programs. However this approach will ultimately lead to higher gas prices and increased reliance on foreign energy.

In the past, it has been fashionable to take the populist road to bash energy companies for high gas prices, but currently, the energy industry may be one of the few that are creating jobs and putting money back in the U.S. Treasury instead of begging for a bailout. Despite the temporary reprieve from $4 gasoline, an economic recovery will likely bring with it higher demand for energy and increased fuel costs.

Instead of higher taxes, and in order to reduce our dependence on foreign oil, Congress should focus on encouraging domestic exploration and production so future increases in demand can be met without exorbitant prices at the pump. Abolishing the manufacturing deduction for energy companies would have the opposite effect—discouraging investment, stifling production, and halting the deployment of new technology - all which will lead to increased prices for families.

Additionally, new taxes on domestic energy companies would create an unfair advantage for their foreign competitors. In fact, Congress’ own non-partisan research service declared last year that repealing Section 199 for the energy companies would decrease domestic production and increase imports.

Now is the wrong time to increase taxes period, but especially on the productive sectors of our economy, particularly ones that are creating American jobs. The only way we will recover from our current economic downturn is through private-sector job creation. It would seem that the President would punish thriving businesses for their success and reward others for their failure.

Efforts to selectively increase taxes on one of the few productive sectors of our economy serve as a warning to all businesses, creating uncertainty and prolonging our economic woes. Sadly, this is par for the course for a Congress that never met a spending plan they did not like.

The current theory of the Federal Government is turning out to be the same one mocked by Ronald Reagan three decades ago: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving subsidize it.

Since January, we have seen subsidies for corporations that are no longer viable and now new taxes for companies that have never once asked the Federal Government for a bailout. This big-government mentality was wrong then, and it remains wrong today.

In energy companies, Congress seems to think they have found an easy target and a simple source of revenue. But for the sake of American families, our economy, energy security, and national security repealing Section 199 is the wrong policy at the wrong time.

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