An Obama administration plan to repeal deductions for oil and gas industries would cost more tax dollars than it would raise, according to a new analysis being released today.
The research, by Louisiana State University economist Joseph Mason, focuses on two tax incentives that the Obama administration repeatedly has targeted for elimination and which could be debated anew as part of a plan to winnow the federal deficit and raise the nation’s debt ceiling.
But Mason said the plan would be short-sighted and lead to less money in federal coffers over the long run:
“The proposed revisions . . . are expected by the Treasury to raise approximately $30 billion in federal tax revenue over the next 10 years. But this comes at the expense of industry cutbacks that can reasonably be expected to cost the economy some $341 billion in economic output, 155,000 jobs, $68 billion in wages, and $83.5 billion in reduced tax revenues. The net fiscal effect — a loss of $53.5 billion in tax revenues — suggests that the policy proposals exacerbate, rather than alleviate, the federal deficit.”
The administration has asked Congress to block U.S. companies from claiming a foreign tax credit on their U.S. returns for any foreign levies — such as petroleum income taxes — they pay in exchange for some economic benefit.
Many of the companies that would be affected, called dual-capacity taxpayers, are in the oil and gas industry. The administration estimates the modification would be worth $381 million in fiscal 2011 and $8.5 billion from 2011-2020.
The White House also wants to bar oil, gas and coal companies from taking a Section 199 domestic manufacturing deduction, which has generally been available to a broad range of U.S. firms. Oil industry advocates say this is unfair discrimination, since it singles out fossil fuels and the deduction would stay on the books for other industries.
Mason is set to discuss his analysis this morning during a briefing by the American Energy Alliance, an industry advocacy non-profit that paid for the report. But Mason said the group had no say over his research or conclusions.
He has written other papers critical of Obama administration policies, including the temporary ban on some deep-water exploration that was imposed in the wake of last year’s Gulf oil spill. He also has penned another analysis describing some of the economic costs of the proposed dual capacity and domestic manufacturing changes.
Instead of raising taxes on the industry, Mason suggests that lawmakers and administration officials expand access to offshore oil and gas resources along the Atlantic and Pacific coasts, as well as the eastern Gulf of Mexico that is now off limits under federal law:
“Encouraging exploration and production in the (outer continental shelf) represents a highly effective means of increasing federal tax revenues generated by the oil and gas industry, while . . . potentially contributing $73 billion annually in economic activity, $16 billion annually in wages, $11 billion annually in federal tax revenue, $5 billion annually in state and local tax revenue, and 250,000 jobs in the short run exploration phases of development. (That would be followed by an additional) $275 billion annually in economic activity, $70 billion annually in wages, $55 billion annually in federal tax revenue, another $14 billion annually in federal royalty payments, $19 billion annually in state and local tax revenue, and 1.2 million jobs in the long-run production phases of development.”
Administration officials previously have noted that of the nearly 37 million offshore acres that the government has offered for oil and gas development, just 2.4 million acres have been leased.
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This does not surprise me. This administration shoots themselves in the foot every time they open their mouths. Either they are grossly incompetent or their intent is to destroy America from within.
How ridicilous! Raise taxes to save money. Just like, on sale, buy extra to have more money savings
A mediocre economist shilling for the industry. Flawed study all around.
And in other news…water is wet, the sky is blue and the sun sets in the West.
Obama wants high gas prices. Remember his advice, buy a new car and check you tire pressure. All this while he flies around on our jet. Obama must go.
Record profits, but the oil industry would have to lay off if it lost a deduction? No wonder the AEA goes to Mason for “analysis”.
Obama wants to single out the oil companies and take some standard tax exemptions away from them. That will help chase them away from the US. Way to go Obama.
This has got to be one of the most ridiculous, rhetoric filled articles of the year. First of all, the administration is not trying to raise taxes on the oil industry. They are attempting to eliminate tax subsidies, enjoyed by the most profitable companies on the planet. The subsidies were never intended to be permanent, but purposed at offsetting some of the capital expense of drilling into deeper waters and other costs. Oil companies are there today, making money hand over foot. So, the subsidies are no longer required. The urgency has expired. The cost of the subsidies contributes to our national debt. Actually, what you are saying is that if the subsidies are eliminated, oil companies will not offset the reduced revenue by decreasing profits and CEO salaries, but will retain those luxuries and lay off workers instead.
If you live and breathe, the taxes that are raised to the rich or, in this case, the energy companies which employ most of my neighbors, will be paid by you. Step away from the Kool-aid. Anybody but Obama.
That’s OK, as long as the tax hike helps Obama get reelected in the short term. That’s all that is important.
Did the energy sector pay to have this guy come up with the findings. Probably so. If energy companies had half a heart, they’d lay off a few over
payed executives and keep the people who do all the heavy lifting around. All this study proves is how greedy man is. There is no moral compass in the energy sector.
@Eric_7_V2: http://www.bus.lsu.edu/mason/
riiiiiiiiiiiiiiight!
obama not only wants the price of oil to be unbearable for the American people, to push his electric car agenda, now the EPA will be able to fine auto companies $25,000 per vehicle if the fuel mileage doesn’t meet his standards.
http://www.nypost.com/p/news/opinion/opedcolumnists/subsidymobiles_rLZ5ZXFvAWUvE7yxshCpLM
Reducing tax incentives in the US would result in American oil companies shifting investments elsewhere, taking jobs with them. Eliminating the dual tax provisions might result in US companies splitting into seperate foreign and domestic entities with profits never repatriated to the US.
Commenters who support higher taxes are ignorant of how businesses actually work.