Job creators enable better American lives
Between now and Election Day, you will be hearing a lot from Washington interest groups, Capitol Hill politicians and President Obama, demanding that Congress “repeal tax breaks for Big Oil” or “make the oil companies pay their fair share.”
But just because a poll-tested message sounds good in a 30-second ad does not make it true. Nor does it translate into constructive pro-growth policies for the American people and our economic recovery. For example, according to a recent report from Standard & Poor’s ResearchInsight, the effective tax rate for the oil and natural gas industry over the past five years has averaged about 44 percent. Meanwhile, according to their own federal filings, Apple last year paid an effective tax rate of around 24 percent and General Electric paid almost nothing.
At a time when businesses can choose to locate almost anywhere in the world, development of domestic energy resources, by definition, creates jobs right here at home. The job-creation potential of the energy sector, however, is not limited to those in oil and gas extraction. It also means more pipeline construction and the expansion of petrochemical plants, which create both construction jobs and permanent manufacturing jobs. Another example is the increased supply of natural gas in recent years, which has sharply lowered its price and thus incentivized manufacturers, who use it as feedstock, to bring their operations and jobs back home from overseas.
Again, I must disagree with this analysis from an economic perspective. Yes, oil companies do tend to be taxed higher than other industries; but that doesn’t mean said higher taxes are not the correct course of action. This article poses the scare tactic that “if we increase taxes, jobs will leave,” despite its almost complete lack of relevancy to this particular point.
First, we must understand what the US does in the oil and natural gas industry. Sure, we have some deposits, but that isn’t our real place in the market. No, the US is the largest refining nation in the world by far. Effectively (at least for the time being) its a proverbial giant in that field. Taxing oil companies to use US refineries is a logical step as, again for the time being, there’s no place they can turn.
But won’t companies go elsewhere in time? Probably, yes. However, there isn’t much that US taxing can do to change that either way. Currently, the largest projects to create new refineries are in Asia, and are financed by government-backed agencies. It isn’t a market decision to open the plants, its a central one.
Ultimately it comes down to one major question: what is the marginal effect of the tax? Oil companies are among the richest in any sector, and show no signs of falling. How would decreasing taxes on them change their decision making? Would they create more domestic jobs? If so- how? They won’t drill more (as that’s a legislative decision). They won’t refine more, as that’s limited by the capital stock already in place. effectively, supply is incredibly inelastic- taxing more won’t change how they function.
Is it your philosophy that government should tax everyone and everything as much as they can get away with?
Let’s squeeze all the money we can out of everyone. The possibilities are endless.
Hmmm . . . people will probably still get haircuts if you tax them a dollar more each.
How about an excise tax on life-saving medical devices? Wait . . . what? Obamacare includes that?