Attempts by traditional energy opponents to cite this week’s earnings reports as justification for their push for raising tax rates on America’s oil and gas industry fail to hold up to scrutiny.
The profit margin of the “Major Integrated Oil and Gas” industry—an average of 6.5% (cents per dollar of sales)—ranks as 108 out of 215 industries. If concern over profits is truly the motivating factor behind these attacks on U.S. energy firms, then opponents should add the most profitable industries—including magazine publishers (52.9%) like Martha Stewart Living, brewers (19.5%) like Anheuser-Busch, gold manufacturers (22.0%), and software developers (22.7%) like Microsoft— to their target list.
These industries utilize some of the very same tax provisions President Obama and his allies in Congress are driving to repeal only for the oil and gas sector. Moreover, America’s traditional energy sector is doing precisely what Congress intended when it enacted the Section 199 manufacturers tax provision—creating new opportunities for U.S. workers. Though other sectors are cutting back their labor forces, The Wall Street Journal noted earlier this week:
In May, the Bureau of Labor Statistics reported there were 413,500 jobs in the oil and gas extraction and support businesses in positions ranging from roustabout to tax accountant.
Rather than manipulate tax law to selectively bolster and attack politically favored and vilified industries, our leaders should work toward real, wholesale reform of what’s become a massively complex system that costs our businesses $40 billion a year to comply. Strong U.S. companies have the ability to create more American jobs. With that in mind, dialogue concerning tax reform should aim at an economic rather than political end.