Have you seen what Senator Robert Menendez (D-NJ) introduced on Monday (March 26, 2012)? He introduced the Repeal Big Oil Subsidies Act (S.2204). Menendez proposed to curb tax credits (notice that he didn’t say subsidies since they don’t receive any, so his bill is mis-named) for the five biggest oil companies – ExxonMobil, Chevron, BP, ConocoPhillips and Shell – and extend tax breaks to wind energy companies. Besides repealing tax credits for oil companies, the Act extends income tax credits for renewable energy sources such as wind, renewable diesel and biofuel derived from algae. That is a laugh, since clean energy companies have no income. In fact, they have to receive subsidies (not tax credits) in order to exist.
Senate Democrats will move forward with consideration of the bill that even its sponsor admits will not reduce gas prices. The US Senate voted overwhelmingly to proceed with debate on Menendez’s bill. Senate Minority Leader Mitch McConnell (R-KY) said he could not think of a better way to show how far out of touch Democrats are on the issue of high gasoline prices. McConnell continued, “[Democrats have proposed] “raising taxes on American energy manufacturers – something common sense and basic economics tell us will lead to even higher prices at the pump.”
“Considering we [oil and natural gas] are one of the few industries that continue to invest, innovate and actually create jobs throughout the economic downturn, the best you can say about this tax increase proposal is that it’s counter-productive,” said Stephen Comstock, American Petroleum Institute (API) tax policy manager. A 2011 study, commissioned by API and conducted by Wood Mackenzie Research and Consulting, found the US government would collect more revenue and facilitate the creation of more jobs if it encouraged domestic oil exploration and production. [emphasis mine]
Oil companies already pay the most in taxes of any industry in the US. Because oil companies invest a lot into the economy, Congress should find ways to facilitate domestic production rather than inhibit it. “Every day, this industry [oil and natural gas] delivers $86 million to the federal treasury in taxes, rental payments, royalties, and other production fees. That’s over $30 billion every year, and more is delivered to state and local governments,” said Comstock. “The oil and natural gas industry invested more than $470 billion in the US economy in 2010 … that’s more than half the size of the 2009 government stimulus, but it happens every year and doesn’t require an act of Congress.”
Does Menendez, or anyone else, think that oil companies will not pass on tax increases to consumers? And does Menendez, or anyone else, think that his bill will suddenly make green energy companies profitable? “I don’t know how anyone can reach a conclusion that punitively raising taxes on an unpopular sector of the economy will make gasoline less, not more, expensive,” said Senator John Cornyn (R-TX).
But that’s just my opinion.