When President Barack Obama addressed the nation’s governors earlier this week, he urged them to pressure Congressional Republicans to make a deal to avoid $85 billion in automatic budget cuts that go into effect March 1. Failing to prevent the so-called “sequester,” he warned, would wreak havoc on the nation’s still-fragile economy.
So why does he want to raise taxes on the one industry that has continued to add jobs in the midst of our slow economic recovery?
While the country limped through a recession that saw most companies shedding jobs, the oil and gas industry actually added 120,000 new jobs between 2006 and 2011. Today, the industry supports 9.2 million American jobs, in spite of the fact that it funnels $86 million in taxes and fees every single day to the federal government. In the third quarter of 2012, in fact, the oil and gas industry only earned 6 cents for every dollar of sales. Compare that to the 21.9 cents earned by the beverage and tobacco industries, and the 19.4 cents earned by pharmaceuticals.
Yet somehow the industry is not paying its “fair share” in taxes?
In addition to its annual taxes, the energy industry also invested an average of $156 billion in infrastructure each year between 2008 and 2010 — more than the utilities and transportation sectors combined.
The simple truth is that the oil and gas industry does a lot to support our economy. Thanks to new technologies, which provide access to previously inaccessible oil and natural gas resources, America’s oil and natural gas production is increasing and will continue to do so for years into the future. That is, if the Washington bureaucracy leaves it free to do so.
This is just the beginning. A recent study released by the Institute for Energy Research shows that increasing access to energy resources on federal lands would grow the economy by $127 billion a year and create 552,000 jobs annually over the next seven years alone. Over the next 37 years, increased access to energy resources would grow the economy by $14.4 billion and create 2 million jobs each and every year.
By growing the economy and creating jobs, allowing greater access to federal energy resources would also increase tax revenues by a whopping $2.7 trillion over the next 37 years. If the federal government wanted to close the deficit and help avoid situations like the sequester, it would allow more energy production.
Unfortunately, some lawmakers have suggested we single out the energy industry and eliminate some of their business-standard tax deductions to increase government revenue in the short term. According to the economic consultants, Wood Mackenzie, eliminating just one of these deductions would put 165,000 jobs at risk because it would reduce oil and gas production. Furthermore, making two other tax changes that only affect the energy industry would reduce GDP by $341 billion and tax revenues by $83 billion over the next ten years.
That kind of short-sighted thinking is what got us into this mess. There are responsible ways to cut spending in Washington and get our fiscal house in order. But no short-term revenue gains are worth the long-term jobs economic pain that comes with singling out a growing industry.