ENR GOP: Five Reasons to Oppose the Menendez Tax Bill
Top 5 Reasons to Oppose the Menendez Tax Bill
The Senate is nearing another cloture vote on legislation that would raise taxes on the largest American oil and gas producers. Just about everyone recognizes that S. 2204 is an attempt to score political points in advance of the November elections, and not to pass sound policy that would actually reduce soaring gasoline prices. While no one expects the bill to pass, we still feel compelled to recap a few of the many reasons why members should oppose cloture on it.
1. It Won’t Help – Judging from both history and recent international examples, it’s virtually certain that S. 2204 would have serious negative consequences. In 1980, the Carter Administration imposed a windfall profits tax on domestic crude oil. According to the Congressional Research Service, that tax reduced domestic oil production, increased our dependence on OPEC, and collected far less revenue than advertised. Great Britain is the latest to learn that hiking taxes on energy producers will lead to adverse consequences. A year after raising its oil tax rates, production declines have tripled from 6 percent per year to 18 percent per year. As a result, the British are having to reverse course and now plan to offer more than $5 billion in new incentives to bring production back.
2. There’s A Better Way – If Senate Democrats are trying to identify ways to raise revenues for the federal government, they should consider the tremendous revenues that would result from greater oil and gas production on federal lands. Here, a tale of two policies becomes clear. Raising taxes will not create jobs, increase production or reduce gas prices, and could actually result in less revenues for the federal Treasury over time. On the other hand, increasing federal oil and gas production will create jobs, generate billions in federal revenues, stabilize gasoline prices and make us less dependent on OPEC.
3. Zero Amendments or Public Process Allowed – As usual, Democratic Majority Leader Harry Reid chose to ‘fill the tree’ in order to prohibit the Senate from considering any amendments to S. 2204 – a bill which hasn’t even passed out of a committee. Instead of welcoming a debate on energy policy, or trying to implement the Republican ‘all of the above’ policy the president has recently embraced, Reid has instead decided that the Senate should ignore production and adopt a “tax only” approach. Republicans have offered a number of amendments that would actually do something to reduce gasoline prices, but not one of them will be allowed to be considered.
4. It’s Highly Misleading – S. 2204 wouldn’t put an end to any “subsidies” for oil and gas producers – because there are none. Basic tax deductions that allow businesses to retain more of their earned dollars is not equivalent to handing them a welfare check. The oil and gas industry actually subsidizes the federal government, to the tune of tens of billions of dollars each year, not the other way around. Presented under the guise of “fairness,” S. 2204 is actually an attempt to raise the industry’s taxes and make it less competitive.
5. It’s Deliberately Punitive – Many Senators are interested in comprehensive tax reform that would flatten the code and lower rates, but this is the wrong way to go about that debate. S. 2204 singles out four companies, based on what OMB describes as their “outsized profits,” and would require them to pay roughly $2 billion more in taxes each year. The sponsor of S. 2204 previously introduced the Stop Cozy Relationships With (SCREW) Big Oil Act, and this is just the latest attack on domestic energy producers.
BONUS – Something that hasn’t been brought up about S. 2204 is that it’s unconstitutional. Article I, Section 7, states that all revenue-raising measures must originate in the House of Representatives. Any that originate in the Senate are subject to a blue slip in the House. This fact makes it all too clear that S. 2204 is not a serious attempt to legislate on our nation’s energy challenges.