The $1 Trillion Choice
- Feb 22, 2013 4:00 pm GMT
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While the White House talks again about raising taxes on oil and natural gas companies, let’s look at a chart that captures the starkly different outcomes – in terms of revenue for government – from two policy paths: higher energy taxes vs. increased energy development:
You read it right: The difference between the two policy choices, in cumulative dollars for government from now until 2030, is more than $1 trillion.
According to a 2011 study by Wood Mackenzie, increased oil and natural gas activity under pro-access policies would generate an additional $800 billion in cumulative revenue for government by 2030. The chart puts into perspective the size of these accumulating revenues – enough to fund entire federal departments at various points along the timeline. By contrast, Wood Mackenize also found that hiking taxes on oil and natural gas companies would, by 2030, result in $223 billion in cumulative lost revenue to government.
Another way to look at it: The chart below shows that the higher-taxes policy path would add about $16 billion in cumulative revenue for government at first, but that sharp revenue losses would follow as increased taxes slow energy development (costing about 22,000 jobs in the process).
The choice is a no-brainer. Yet some in Washington continue to push for the higher taxes path – the less-energy, fewer-jobs, less-revenue-for-government path. White House Press Secretary Jay Carney this week:
“If we have one fundamental goal here in Washington, it should be to work towards growing the economy and increasing job creation, not doing unnecessary, arbitrary things to halt or reverse that process.”
Carney’s right. We need policies that help the economy. Yet, working against the economy and job creation is the likely result from the course the administration keeps pushing: discriminatory tax increases on our industry – one that already contributes an average of $86 million a day to the federal government in income taxes, bonus bids, rental payments, royalties and other fees. API Executive Vice President Marty Durbin, in a recent conference call with reporters:
“When it comes to taxes, singling out our industry for tax increases is bad economic policy, it’s bad tax policy and it punishes one of the few industries that has created jobs and grown our economy throughout the economic downturn. We pay more than our fair share, and despite repeated allegations, we receive no subsidies. We pay federal taxes at an effective rate – 44 percent – that is well above the 29 percent effective rate paid by other S&P Industrials.”
As Durbin noted, higher taxes would impact the significant stimulus our industry provides to the broader economy – $545 billion in 2012. That figure represents jobs, investments in facilities and operations and energy development that generates millions in revenue for government – stimulus that doesn’t require legislation from Congress or a new federal program. Here’s how industry’s investments, measured in capital spending, stacked up from 2006-2011:
“Short-sighted, punitive tax proposals could put at risk those investments, diminishing what we can do for economic growth, sacrificing potential jobs and, paradoxically, sacrificing revenues that could come from new development and new jobs.”
If the goal is more revenue for government from the oil and natural gas industry, there are two paths: One that produces a sizeable net loss over the next two decades – as well as job losses and less energy – or one that, through increased energy development, generates hundreds of billions of additional dollars for government while adding jobs, growing the economy and producing more of the energy our country needs: the $1 trillion choice.