Closed-door Energy Taxes Will Harm US Competitiveness
October 18, 2007 | Filed Under 00Publius Contributor, Democrats/Leftists, Energy, IER, Science, Security/Safety, Society/Culture, Technology, Uncategorized | Comments Off
IER Press Release
Pelosi rushes backdoor bill, neglects pro-growth solutions in favor of failed policies
WASHINGTON- Today, The Institute for Energy Research (IER) cautioned that Congress’ proposed $15 billion tax hike on the U.S. oil industry will raise consumer prices and put domestic companies at a competitive disadvantage. At the same time, House Speaker Nancy Pelosi is avoiding public scrutiny by refusing to review the bill in a bipartisan conference committee, rather than allowing open debate of the details of this misguided energy policy. This closed-door approach to reconciling the energy bill only underscores its shortcomings: less energy and higher prices.
Yesterday, a panel of experts from energy policy and economics organizations discussed the harmful effects of this proposed legislation. Robert Murphy, economist for the Institute for Energy Research (IER); Ben Lieberman, senior policy analyst with the Heritage Foundation; and Margo Thorning, senior vice president and chief economist with the American Council for Capital Formation explained possible unintended consequences for consumers and businesses of higher taxes on the oil and gas industry. For example, the Windfall Profits Tax of the 1980s resulted in lower domestic oil production, higher oil imports, and a depressed U.S. oil industry with reduced profits that limited the development of technologies for obtaining oil in deeper off shore and on shore wells.
“This proposed tax hike would generate only $15 billion, whereas opening exploration in the Alaskan National Wildlife Reserve [ANWR] would generate $75 billion in revenue,” Lieberman explained. This type of pro-growth strategy, he added, would preserve American goals of increased supply and energy security, whereas taxes undermine them. Lieberman characterized the current proposal as “raising taxes on energies that work in order to subsidize energy sources that don’t work,” referring to the economic inefficiency of biofuel and wind energy.
Murphy catalogued the failures of past attempts to tax or regulate energy prices, and the damage that was done to consumers in high prices, gas shortages, and lost time. We can expect more of the same, he said, if proposed legislation passes. “High taxes and controls by the U.S. federal government raise the world price of oil,” he said, “which makes the U.S. more dependent on foreign producers and U.S. companies less competitive in a global market.” He also noted that oil companies are paying their share of income taxes, which in 2005 totaled $66.9 billion.
Expressing her concern about the compromising of U.S. competitiveness, Thorning said “The tax code is a ball and chain around American industry – putting US firms at a disadvantage.” She encouraged legislation that would reduce the cost of capital for new energy investment and promote availability of domestic petroleum supplies rather than imposing new punitive taxes on the industry. Speaking on price gouging and quoting a June 2007 study that was commissioned by ACCF, Thorning noted that “if price controls like those being considered in legislative proposals earlier this year had been in effect in 2005 during Hurricanes Katrina and Rita, losses to households and business would have totaled $1.9 billion.”
Pelosi’s “non-conference strategy” leaves little room for discussion of these fundamental points. After pledging the most honest, open Congress in history, and preaching the “obligation to reach beyond partisanship to work for all Americans;” this back-door method would silence critics who warn the bill does nothing for energy security and will cause long-term market damage.
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The Institute for Energy Research (IER) was founded in 1989 to conduct historical research and evaluate public policies in the oil, gas, coal, and electricity markets.
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