Obama, Menendez Push Economically Painful Anti-Energy Bill

Obama, Menendez Push Economically Painful Anti-Energy Bill

March 28, 2012    RSS Feed      Print 

Pete Sepp is executive vice president of the National Taxpayers Union.

At the beckoning of President Obama, Sen. Robert Menendez once again introduced a bill in the Congress to increase taxes on oil and natural gas companies by about $4 billion annually. My colleague at National Taxpayer Union warned just Monday that, if passed, this measure would not reduce fuel prices, and in fact could add to the burden faced at the pump. Still, supporters hope this maneuver will be seen as a way to make these companies feel some kind of pain in return.


But here’s a problem with those who would fashion themselves as  modern day equivalents of Babylonian King Hammurabi and his ancient code  of justice. The ones who will be injured most are the consumers and the  workers involved in delivering the energy they want.

[See a collection of political cartoons on energy policy.]

Because many of the signs at gas stations are emblazoned with the  logos of U.S. oil and natural gas companies like ConocoPhillips,  Chevron, and ExxonMobil, Americans associate these companies with high  gas prices. This is hardly surprising, but in fact the prices posted at  these local distributors are set by the vendors of the stations. These  vendors purchase their resources from the larger companies that  develop and refine crude oil for commercial use, but have no commitment  to resell it for a specific price.

Local distributors mark up their prices based on demand, location,  and a number of other factors to arrive at an acceptable (after-tax)  profit margin that will keep them in business. As a Tax Foundation analysis  concluded when similar tax-hike schemes were making the rounds back in  2010, when measured over a nearly three-decade-long period, tax payments  from the oil and natural gas industry exceeded its profits by 40  percent. And now President Obama and Senator Menendez want to increase  the government’s take?

[Read the U.S. News debate:  Is Obama's Corporate Tax Plan A Good Idea?]

By increasing the costs associated with extracting and refining oil  and natural gas, this measure will add to the price at the pump while  fattening government coffers. But in the long run, those coffers might  not be so corpulent. Louisiana State University Professor Joseph Mason, who also writes for the U.S. News blog Economic Intelligence,   made this point in a 2011 study,  concluding that the policies Obama and Menendez seek could slow  economic activity from oil and natural gas to the point where other  government receipts (such as from profit and payroll taxes) suffer. He  estimated net long-run losses of $54 billion.

In an effort to encourage domestic manufacturing and job creation—and take the edge off the high rates of the corporate tax system—the  Section 199 deduction was introduced and made available in 2005 to  qualifying firms throughout the economy. The Menendez bill will  eliminate this deduction for only the oil and natural gas industry, even  though this is one sector that’s been contributing to a nascent  recovery benefiting many people. According to data from the Bureau of  Labor Statistics, each petroleum product manufacturing and refining job  yields 8.2 additional jobs, the highest multiplier effect of any industry.

[See a collection of political cartoons on the economy.]

Punishing an industry that is creating a large number of jobs in a  sluggish economy—while simultaneously boosting the price of fuel—is  hardly the path that will lead to a more robust expansion. In fact,  Federal Reserve Chairman Ben Bernanke conceded as much at a recent congressional hearing, stating, “Higher energy prices would probably  slow growth.”

Additionally, a portion of the Menendez legislation would make it  more difficult for these companies to repatriate earnings made abroad.  U.S. oil and natural gas firms go to where the resources are, in part  because of the slim profit margins and limited access to such resources  they face domestically. By amending what’s known as the dual capacity  rule, which offers a credit on earnings that were already taxed  overseas, the government proposes to double tax any earnings returned  for reinvestment in the United States. Other types of companies  operating abroad receive this tax treatment, making the Menendez bill  the polar opposite of the across-the-board tax simplification this  nation needs now. Hammurabi would likely not be amused.

If Menendez and the Obama administration have problems with the  current tax structure, why not institute a larger tax reform? Eliminate  complex deductions across the board. Cut the billions in annual “green  energy” giveaways while at it. Reduce the corporate rate to encourage  companies to invest in the United States, and watch as investment pours  into the country. Or, we can ignore this strategy and watch America  decline—not dissimilar to the way Hammurabi’s realm did after his  death.

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Comment by Hart Daley on March 28, 2012 at 6:52pm

Vote Obama out!

 

Maine as Third World Country:

CMP Transmission Rate Skyrockets 19.6% Due to Wind Power

 

Click here to read how the Maine ratepayer has been sold down the river by the Angus King cabal.

Maine Center For Public Interest Reporting – Three Part Series: A CRITICAL LOOK AT MAINE’S WIND ACT

******** IF LINKS BELOW DON'T WORK, GOOGLE THEM*********

(excerpts) From Part 1 – On Maine’s Wind Law “Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine if the law’s goals were met." . – Maine Center for Public Interest Reporting, August 2010 https://www.pinetreewatchdog.org/wind-power-bandwagon-hits-bumps-in-the-road-3/From Part 2 – On Wind and Oil Yet using wind energy doesn’t lower dependence on imported foreign oil. That’s because the majority of imported oil in Maine is used for heating and transportation. And switching our dependence from foreign oil to Maine-produced electricity isn’t likely to happen very soon, says Bartlett. “Right now, people can’t switch to electric cars and heating – if they did, we’d be in trouble.” So was one of the fundamental premises of the task force false, or at least misleading?" https://www.pinetreewatchdog.org/wind-swept-task-force-set-the-rules/From Part 3 – On Wind-Required New Transmission Lines Finally, the building of enormous, high-voltage transmission lines that the regional electricity system operator says are required to move substantial amounts of wind power to markets south of Maine was never even discussed by the task force – an omission that Mills said will come to haunt the state.“If you try to put 2,500 or 3,000 megawatts in northern or eastern Maine – oh, my god, try to build the transmission!” said Mills. “It’s not just the towers, it’s the lines – that’s when I begin to think that the goal is a little farfetched.” https://www.pinetreewatchdog.org/flaws-in-bill-like-skating-with-dull-skates/

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Hannah Pingree on the Maine expedited wind law

Hannah Pingree - Director of Maine's Office of Innovation and the Future

"Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine."

https://pinetreewatch.org/wind-power-bandwagon-hits-bumps-in-the-road-3/

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