Raising Taxes on Oil Companies

All the signs of spring are here. The grass has started growing again, the birds are singing, and the sap has started rising in Washington.

As a response to high gasoline prices, legislation has been proposed to increase taxes on the five largest oil companies. It is being billed as the removal of tax breaks, which strikes me as terribly disingenuous. If you are raising revenue, that is a tax increase.

The news reports I have read are short on details about what specific subsidies are being changed or lifted. Apparently some of the provisions under review have been part of the tax code since the 1920’s.

The biggest piece of the puzzle, however, is undoing a change to the tax code that was made in 2005. This change lowered the maximum income tax rate from 35% to 32% for companies in certain manufacturing industries. The proposed legislation raises the income tax rate for these five companies from the current 32% to 35%. This tax increase provides $18 billion of the total $21 billion increased tax revenue of the whole package.

First off, when the government changes your tax rate from 32% to 35%, that’s not eliminating a subsidy, that is a tax increase. The next point of contention I have with this is why single out the oil and gas industry? Why not increase taxes on the car companies, or paper products manufacturers? And then there is the question of what makes these five companies so special? That proviso has Supreme Court challenge written all over it.

The most amazing thing about this proposed legislation, however, is that it will do nothing to reduce gas prices. High gas prices are what made these companies a target in the first place.

So let’s take a concern of the citizenry, use that as an excuse to raise taxes by scapegoating the largest players in an industry. Ignore the reality that what you propose is probably unconstitutional. Sell it by claiming you are eliminating subsidies, instead of calling it an increase. And finally, the actions you propose will do nothing to address the original concern of the citizens. That’s our Congress for you!

There are times when I despair for the future of the republic.