Taxes, Energy and the Economy
As a new administration and Congress settle in, policymakers should resist whatever inclination there might be to raise taxes on U.S. energy companies. For starters, the overwhelming majority of U.S. voters think it’s a bad idea. Harris Poll surveyed actual voters on election night, asking whether they support or oppose higher taxes that could negatively impact domestic energy investment and development – 72% opposed. In a world where partisanship is growing, opposition to higher energy taxes is consistent across the political spectrum.
Most Americans probably recognize that energy tax policy can have as much impact on U.S. energy security as other factors, such as access to reserves and the regulatory environment. They may not know that our industry already contributes about $70 million a day on average to the federal government in taxes, rents and royalties. From 2011 to 2015, oil and natural gas income tax expenses (as a share of net income before income taxes) averaged 37 percent, compared to 25.8 percent for other S&P Industrial companies.
The overarching point is that industry already is a significant contributor to the federal treasury – more than most sectors. The better idea to raise revenues for government is to implement pro-development energy policies that foster increased industry activity that will generate more tax receipts, rents and royalties.
Higher energy taxes are an obstacle to oil and natural gas production that now leads the world, surging domestically thanks to development of energy-rich shale deposits using modern hydraulic fracturing and horizontal drilling. America’s energy renaissance has boosted the economy, increased U.S. energy security, lowered carbon emissions and raised this country’s standing in the world. The right course – for U.S. energy, economic growth and security – is to sustain and extend America’s energy renaissance with policies that encourage safe development, while also increasing revenues to governments at all levels.
With many lawmakers and pundits calling for an overhaul of our domestic and corporate tax code to make the U.S. more competitive, the U.S. oil and natural gas industry is part of that conversation. Continue on to read more about our tax reform principles.
It’s out there; the myth that America’s oil and natural gas industry receives federal subsidies. Subsidies are cash outlays from the U.S. Treasury, and the oil and natural gas industry doesn’t get them. Legitimate tax treatments used by oil and natural gas companies – similar to those used by other business sectors – regularly come under attack by those pushing for higher taxes on energy companies.
There are many tax issues that API is currently engaging with lawmakers on. Here you will find data and talking points on key tax items the industry is focused on.
API partners with leading scholars, researchers, world-class qualitative and quantitative analysis firms and data analysts to produce unparalleled studies and research. See below for examples of various studies about the effect of tax policy on the oil and natural gas industry in the United States.
The Administration’s FY2017 Budget includes proposals that again target the U.S. oil and natural gas industry for tax increases. Between proposed tax reform “reserves” and other provisions, the industry would be burdened by over $400 billion in additional taxes.