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Reducing Tax Incentives?

By Children’s Home Society of Florida Foundation

In his address to the nation last week, President Obama indicated that he favors a reduction in the tax incentives for oil and gas companies. He noted that gas in some communities is now over $4.00 a gallon and oil companies had $25 billion in profits during the early months of 2011.

While he does not have “a problem with any company or industry being rewarded for their success,” the President suggests that it would be appropriate to reduce tax incentives for the oil and gas industry.

The Response

House Ways and Means Committee Democrats responded with a letter to Chairman Dave Camp (R-MI). They noted that a specific Sec. 199 Domestic Manufacturing Deduction saved the oil companies approximately $1 billion last year in taxes. Democratic Members of the House Ways and Means Committee recommend that this benefit be eliminated for the oil companies.

Assessment

The energy industry responded to the proposals. American Petroleum Institute (API) President Jack Gerard suggested, “We need to stay focused on energy policy, not demonizing industries.” The energy industry notes that there are 9.2 million Americans who are engaged in the domestic oil and gas industry. Oil and gas represents 7.7% of GDP. If the incentives were reduced, there could be lower employment and higher costs due to greater imports of foreign oil.

Editor’s Note: Sen. Max Baucus has indicated that he will introduce legislation to reduce the oil and gas tax incentives within the next two weeks. He plans to spend the revenue gained through changes in oil and gas tax rules on new incentives for clean energy.

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Filed under: Taxation | Tagged: American Petroleum Institute, Children's Home Society of Florida Foundation, David Camp, House Ways and Means Committee, Jack Gerard, Oil and Gas Tax Breaks, Sec. 199 Domestic Manufacturing Deduction | 5 Comments »