You know the old saying that no good deed goes unpunished.
In Washington, it’s more like no good deed goes untaxed.
The rising price of oil is a decidedly mixed blessing. On the one hand, we are all paying higher prices at the gas pump. Ouch!
On the other hand, the increased price has energized, so to speak, the oil and gas industry. They are ramping up drilling in places that might not have been profitable under the much lower prices up until a few years ago.
Those industries were already big investors. Over the past 15 years, the five biggest oil companies invested more than $750 billion in the energy infrastructure.
Now, wells are popping up all over the place.
So how does the Senate show its appreciation for this massive research-and-development effort? Why, raising the industry’s taxes, of course. About $29 billion worth of increased taxes, to be precise.
According to Texas Senator Kay Bailey Hutchison, the legislation:
- Repeals the manufacturer’s deduction for refineries ($9.433 billion over 10 years)
- Establishes an Outer Continental Shelf (OCS) excise tax (13%) on crude oil or natural gas produced from OCS in the Gulf of Mexico ($10.684 billion over 10 years)
- Imposes a tax on finished gasoline ($824 million over 10 years)
- Eliminates Section 907 tax credits for foreign oil production, exposing them to double taxation ($3.187 billion over 10 years)
This is madness! As these taxes get passed on to the consumer—and all good economists know that’s what happens to taxes—they will only drive up the price of gasoline even more.
And they will hurt the poor the hardest because they are least able to absorb the increased costs.
Of course, most of you probably didn’t even know these taxes existed, which takes us to the most important part of this debate: Isn’t it time for Congress to look at our corporate tax mess and find a way to do it simply and transparently?
A simple, transparent and low tax rate would encourage more investment, reduce our dependence on foreign oil and—Are you listening, senators?—likely bring in even more tax revenue.