At a Washington, D.C. event earlier this week, Gulf State residents feeling neglected by policies that punish workers in the oil and gas sector sent Congress a simple message: “My Job Matters.” A new amendment put forward by Democratic Senator Max Baucus and added ironically enough to a small business jobs bill by Democratic Majority Leader Harry Reid late Thursday night can be interpreted as their response: “No it doesn’t.”
The proposal I am referring to is a repeal of Section 199 for oil and gas companies. Section 199 is a tax incentive that applies to all American businesses, and aims to promote growth by giving preferential tax treatment to investment in domestic jobs. A repeal of this proposal represents a congressional “cold shoulder” to the people who work in the oil and gas sector that would be directly affected, and to every American who relies on affordable energy to heat his home, drive his car, or run her business.
By drastically increasing the tax burden faced by our domestic oil and gas suppliers, Senator Baucus’s proposal would cost thousands of good-paying domestic jobs, increase costs to consumers, who would be forced to pay higher energy prices, and add to the uncertainty our domestic energy industry and the small business that depend on it are already facing in the wake of the devastating moratorium put in place by the administration as a result of the BP Deepwater Horizon spill.
If the recession taught us anything, it is that a climate of uncertainty and higher energy prices equal fewer jobs. Oil and gas are not only used to drive our cars, but to heat and cool office buildings, to transport materials, and to conduct various activities that ensure we have a thriving economy. When we add a significant increase in costs to these activities, they diminish. And diminishing activity means companies downsize, workers are laid off, and people spend less. In fact, recent estimates show that the repeal of Section 199 credits would cost the economy 637,000 jobs, and reduce household earnings by nearly $35 billion over the next decade. In light of Friday’s depressing job numbers, this new proposal just doesn’t make sense.
Adding insult to injury, other discriminatory tax increases on the domestic oil and gas industry that are being considered will actually benefit foreign competitors and state owned firms in places like China, Russia, and Venezuela. Suffocating domestic producers with new taxes puts U.S. energy companies at a competitive disadvantage compared to these foreign competitors, rewarding the often hostile regimes they support. Giving favorable tax treatment to foreign firms at the expense of U.S. jobs doesn’t make sense in any economic climate.
We are a nation built on energy. Our economic system halts without a steady supply of affordable and reliable energy sources. By choking out our domestic oil and gas companies through tax increases like the one favored by Senators Baucus and Reid, we will be sentencing our country to more imports, slower growth, and further job losses. This maneuver, which attempts to gain a political victory for the upcoming elections, not only dismisses the importance of the jobs of hardworking Americans, but signifies that the only jobs they care about are their own. Despite the name, this measure is not in the interest of America’s small businesses, workers, or communities.
Thomas J. Pyle is the president of the American Energy Alliance.