Back from Congressional recess, Senate Majority Leader Harry Reid (D-Nev.) has made it clear that he wishes to raise taxes on energy providers. He has encouraged Senator Nelson (D-FL) to file an amendment SA 4595 to the Small Business Jobs and Credit Act that would repeal the Section 199 tax deduction for energy producing companies.
Politicians who support Senator Nelson’s amendment may believe that they are standing up to “Big Oil.” Instead, these tax hikes would harm countless energy consumers and workers in the industry. The proposed energy tax hikes would inevitably be passed onto consumers in the form of higher energy prices. Louisiana State University economist Dr. Joseph Mason found that these tax increases on oil and gas companies would cost over 154,000 Americans to lose their jobs. The proposal would likely reduce economic output by at least $341 billion. According to Dr. Joseph Mason,
With at least 150,000 U.S. jobs at stake — in fields ranging from healthcare to real estate — it’s clear that the cost of repealing Section 199 and dual capacity far outweigh the potential benefit of increased government revenues that may be derived from the proposal.
The Obama administration predicts that these energy tax hikes will bring in $17 billion in tax revenue. However, these costly tax hikes will likely bring in far less revenue. As seen throughout history, tax hikes ultimately discourage production which typically leads to less-than-expected tax revenue. Economists have a rule: if you tax something, you get less of it. If these tax hikes pass, Americans will have less energy options to choose from.
Senator Nelson believes that these energy tax hikes will offset the cost of his other proposal to scale back businesses’ reporting requirements. Hidden somewhere in the 2,400 pages of the new ObamaCare law, businesses are now required to submit an IRS form 1099 for all goods and services purchased over $600. Senator Nelson who realizes that this regulation would hurt small businesses, has proposed a measure to scale back reporting requirements to exempt small businesses with less than 25 people and raise the payment threshold to $5,000. While scaling back these business reporting requirements is a step in the right direction, the provision should not be “paid for” by repealing the Section 199 tax rules for energy companies.
Unfortunately, increased energy costs will hurt the poor the most. With unemployment around 10 percent, many Americans are already struggling to afford enough gas to drive to the grocery store. Sadly, a new Census report is expected to reveal that the poverty rate increased 14 percent in 2009—the highest single-year increase since the government starting calculating poverty data. With the cold winter a few months away, this is no time to raise energy costs for struggling families. Senator Nelson’s SB 4595 is likely to be voted on this week, contact your representatives and tell them to vote “no” on this energy tax hike that will increase energy costs and job losses!