Another round of Toxic Tax Cocktails
posted on: Jan 28, 2010
Another round of Toxic Tax Cocktails
President Obama will make his second State of the Union address tonight, and I encourage every member of our industry to listen closely to what he has to say. There are some things we can undoubtedly expect – a series of ovations by some, grumblings from others, and a focus on health care, clean energy, and the need to create more jobs.
While you probably won’t hear the term “tax increases,” that too will be an underlying theme as the President and Congress look for ways to fund their initiatives. And guess who’s in the crosshairs yet again? That’s right— us. The very folks who have a solution to the energy, economic, and environmental challenges American is currently facing.
Last year I warned of a “Toxic Tax Cocktail” that would hit our industry and the 260,000 jobs we provide in the Intermountain West. Well, Congress is again considering proposals by the Obama administration to significantly increase our industry’s tax burden, which would discourage investment and job growth, while prolonging our economic recovery. The President’s targets are:
- Expensing of Intangible Drilling Costs (IDC)
- Percentage Depletion
- Passive Loss Exception for Working Interests
- Credit for Enhanced Oil Recovery Projects
- Manufacturing Deduction
- Credit for Production From Marginal Wells
- Deduction for Tertiary Injectants
For a detailed explanation of each of the provisions above, click here to view IPAMS position paper.
Last year entitlement programs — like Social Security, Medicare, and Medicaid — consumed all the revenue brought into the Treasury from taxes (specifically, revenues were $2.1 trillion and mandatory spending was $2.094 trillion), which means every dollar spent on discretionary spending, which funds national security, education, energy initiatives, and all our federal agencies and their programs, had to be borrowed from the public or from foreign countries. Under the current budget, the only thing we can actually pay for are these mandatory government social programs. Our total spending last year was almost 25 percent of our GDP, and the annual budget deficit was equal to almost 10 percent of our GDP, levels not seen since World War II.
History has taught us that nothing is as devastating to economic recovery as raising taxes on energy. Increasing the tax burden on the independent producers who supply 82% of our nation’s natural gas and 68% of our oil will add inflationary pressures throughout all segments of the economy. Consumer spending accounts for two-thirds of our economy. When consumers are forced to spend more on driving to work and heating their homes, they have less money to for discretionary spending. Raising taxes on American energy producers is the same as raising taxes on Americans– it’s that simple.
Many of you have asked recently what you can do to make a difference. Believe it or not, contacting your congressional representatives is the single most effective thing you can do to promote good public policy.
If you are proud of the hard work you do to develop clean, domestic energy, consider sharing your views on the tax increases with your friends and neighbors who rely on the energy we produce. You might find that they appreciate knowing how this tax increase will impact their lives.
