The Daily Caller

The Daily Caller

Dems use oil spill as excuse to raise energy taxes

Chris Prandoni
Federal Affairs Manager, ATR

While there is a smörgåsbord of Democratic energy bills floating around Congress, the common thread they all share is a yearning to further tax oil and natural gas producers. Expected to be voted on today, H.R. 3534, the Consolidated Land, Energy, and Aquatic Resources Act of 2010 (CLEAR Act) levies a tax of $2 per barrel of oil and 20 cents per million BTU of natural gas. Thursday the House voted on H.R. 5893, the humorously named, Investing in American Jobs and Closing Tax Loopholes Act of 2010, a bill which would tax oil and natural gas producers and raise gas prices for consumers.

Although these bills are broadly referred to as “spill bills,” they are simply the latest iterations of the Democratic Party’s disdain for America’s energy producers. Taxing oil and natural gas producers is a slam dunk for the left: they get revenue for their pet projects and artificially make alternative forms of energy seem economically competitive at the expense of taxpayers.

If the supposed impetus for these bills is to prevent future spills, it is worth asking if further taxing America’s oil and natural gas producers will accomplish this goal. In reality, there is no scenario in which taxes could thwart a would-be spill. Depending on the bill, the revenue collected from an oil or gas tax will go to the general fund—where politicians can spend it on whatever they like—or a “conservation fund,” which would be theoretically be used to clean up another oil spill, but would likely be used as a vanity slush fund. If politicians are looking for a way to prevent future spills, a tax will not accomplish this goal.

These energy taxes will have the potential to seriously restrict our economy, raising costs for families at the pump, impelling layoffs, and in many cases deterring companies from investing in the U.S. Often overlooked is how heavily the oil industry is already taxed; the effective tax rate for oil and natural gas companies in 2009 was 48 percent compared to 28 percent for the rest of Standard & Poor industries, explaining why oil and gas companies paid $13.3 billion in taxes last year.

Of all the cars on the road, 95 percent of all energy used to power them comes from oil. Levying more taxes on oil and natural gas would directly hit Americans who own cars and indirectly affect every American due to increased transportation costs, this reducing everyone’s disposable income.

Oil and natural gas taxes could prove to be even more costly for people employed by the industry. A whopping 7.1 million Americans work for oil and natural gas producers, at some level. With unemployment hovering around 10 percent, and unlikely to fall anytime soon, it would be highly irresponsible to pass legislation that compounds this problem. In fact, oil and natural gas production has been one of the few bright spots in America’s labor market over the past two years.

Only one state has created net private jobs since the economic downturn began, North Dakota. This anomaly is due to the discovery of a huge oil reserve two miles underground. Oil companies invested tens of millions into once-sleepy North Dakota towns, spurring growth and increasing state revenue.