Obama Wrong on Corporate Tax Reform and Energy Policies

In his recent energy speech, President Obama correctly stated that America’s system of business taxation is in need of reform. However, his proposal will not deliver the meaningful and sustainable change that will ensure the energy industry that employs over nine million American jobs can remain competitive globally. 

President Obama endorses tax hikes on U.S. energy producers of oil, gas and coal as a solution to our nation’s economic woes.  His real motive is to fund generous handouts to artificially prop up “green energy” industries such as solar (think Solyndra), wind, geothermal, and ultimately eliminate fossil fuels.  In his “Framework for Business Tax Reform,” President Obama offsets a reduction in the corporate tax rate by eliminating oil and gas manufacturing tax deductions and preferences such as expensing of intangible drilling costs and percentage depletion for oil and natural gas wells.   His proposal ignores the fact that the cuts disproportionally affect small, independent American companies.  Because these businesses usually file as individuals, they would not benefit from a reduction in the corporate tax rate but would still be required to shoulder the elimination of vital tax deductions.

Reforming tax preferences should be part of a broader plan to lower the tax rate, but not all businesses within an industry can be treated the same.  While “Big Oil” may be a convenient whipping boy for the Obama Administration, his proposals would have the greatest negative impact on independent oil and gas companies and the small businesses that support them.

As Congress revisits tax reform, we must distinguish between incentives that benefit small privately held companies and those that benefit the largest and most profitable corporate companies.  Many of the deductions on the chopping block, such as percentage depletion and passive loss exception, don’t even apply to the major energy corporations.  While large companies with offshore holdings would be better positioned to absorb the impact of Obama’s energy tax hikes, small businesses simply won’t survive.   

Our current tax code discourages American investment and job creation, instead providing incentives for companies to move their production, jobs and profits overseas.  Our corporate tax rate is the highest in the world, making investment in America a poor choice for global companies.   

In 2008, then candidate-Obama accurately outlined his energy plans when he said that under his plan “prices would necessarily skyrocket.” His current tax reform plan is to decrease oil profits, which will reduce exploration, diminish America's competitive power and drive up consumer prices even more, all to achieve his stated goal of increasing "green energy." That's not what America needs.

We need a stable corporate tax structure that maintains global competition for American businesses and doesn't send jobs, production and revenue overseas. Our economy needs affordable, domestically-produced energy and the jobs and federal revenue that come with it. The only way to achieve that is through low taxes and fair, predictable regulations.