|
GOP joins with three Dems to save tax break
Kay Cashman Petroleum News
On Sept. 14, 39 Republicans in the U.S. Senate and three Democrats blocked a proposal that would have prevented the country’s largest oil companies from taking a popular domestic manufacturing tax deduction.
The three Democrats that made blocking the proposal possible were senators Mark Begich of Alaska, Mary Landrieu of Louisiana and Blanche Lincoln of Arkansas.
According to a Sept. 14 report in the Houston Chronicle, the section 199 domestic manufacturing tax deduction allows companies to subtract qualified domestic production activities from their taxes, which “translates to a deduction of up to 6 percent of income from oil and natural gas production.”
The measure would have prevented major integrated oil companies from taking the deduction. Industry advocates said the proposal unfairly singled them out. But the Chronicle quoted Sen. Bill Nelson, D-Fla., as saying, “The last thing we should be doing is transferring public tax dollars to the pockets of BP and other major oil producers that continue to rake in exorbitant profits because of high prices at the pump.”
The report said Stephen Comstock, tax manager for the American Petroleum Institute, commended the Senate for blocking a shortsighted measure that “would have raised taxes and killed jobs.”
Americans oppose tax increases Based on a Wood Mackenzie analysis of production impacts from eliminating the manufacturing and intangible drilling cost tax deductions for the oil and natural gas industry, API calculated 58,800 jobs would be put at risk in 2011 and 165,000 in 2020. A separate study of the impacts of ending the manufacturing tax deduction and increasing taxes on the industry’s foreign-earned income by Louisiana State University professor Joseph Mason concluded that 154,000 jobs could be lost in 2011.
The U.S. oil and natural gas industry is one of the nation’s biggest taxpayers. According to the Energy Information Administration, the industry paid almost $100 billion in federal income taxes in 2008 (latest available data). An API review of Compustat data shows that the oil and gas industry had an effective average tax rate of 48.4 percent in 2009 compared with 28.1 percent for the rest of S&P industrial companies.
A Harris Interactive poll commissioned by API and released Sept. 15 showed that by two-to-one Americans oppose new oil and gas taxes, primarily because they fear tax increases will kill jobs.
| 