- Energy Tax Facts
- 13 Aug 13
Senators Agree on Importance of Current Tax Provisions to Future Economic Growth
This year the Senate Finance Committee’s work on a potential overhaul of the U.S. tax code has included outreach to members of the Senate in order to identify those tax provisions that should be retained because they help “grow the economy, make the tax code fairer, or effectively promote other important policy objectives.” On Friday, July 26, a bipartisan group of U.S. Senators urged the Committee to meet its own objective of growing the U.S. economy through the tax code by leaving intact a number of important tax provisions that continue to lead directly to millions of American jobs in the oil and natural gas industry.
“The US has seen a fundamental change to its energy future with the exploration and development of domestic oil and gas reserves. This investment will generate positive benefits for both consumers and businesses for the foreseeable future. This change will also have broader, even global impacts, in other US policy areas. Fundamental tax reform should not undermine this progress,” wrote Sens. Jim Inhofe (R-Okla.), Mary Landrieu (D-La.) and Mark Pryor (D-Ark.) in a pair of letters to the leaders of the Finance Committee.
“The impact of tax reform should also consider an industry’s economic contribution to the overall economy as well as directly to the Federal Treasury,” they continued. “On that point, it should be noted that these provisions provide certainty to an industry that is already paying, on average, $85M a day in taxes, rents and royalties to the federal government.”
In a separate letter, Inhofe, Landrieu and Pryor were joined by Sen. Tom Udall (D-N.M.) in reminding the Senate’s main tax-writing committee of one of the realities of the U.S.’s most important job-creating industry: that continued domestic exploration requires significant capital investments.
“We ask that the Senate Finance Committee retain current law regarding intangible drilling costs (IDCs), percentage depletion, and the passive loss exception for working interests in oil and natural gas properties,” the Senators wrote to the Finance Chairman and Ranking Member. “The small businesses that make up the independent oil and gas industry in America rely on these provisions as a means of securing access to the capital needed to continue promoting the domestic production of oil and natural gas, which is essential to accomplishing our mutual energy security policy goals and creating the good-paying jobs sustained by the domestic oil and gas industry.”
And for good measure, the Senators made sure to illustrate plainly the value these very provisions are having on the economy right now, and also what would be at stake should they disappear or be undermined:
In October 2012, IHS Global Insight issued a report, “America’s New Energy Future: the Unconventional Oil and Gas Revolution and the US Economy,” that found:
Employment attributed to upstream unconventional oil and natural gas activity will support more than 1.7 million jobs in 2012, growing to some 2.5 million jobs in 2015, 3 million jobs in 2020 and 3.5 million jobs in 2035.
In 2012, unconventional oil and natural gas activity will contribute nearly $62 billion in federal, state, and local tax receipts. By 2020, total government revenues will grow to just over $111 billion. On a cumulative basis, unconventional oil and natural gas activity will generate more than $2.5 trillion in tax revenues between 2012 and 2035.
Sen. Mark Begich (D-AK) also echoed his fellow Senators’ sentiments in a letter to the Committee, highlighting the importance of these provisions for both his home state of Alaska and the nation. As Sen. Begich emphasizes, these provisions are critical to the continued operation of independent producers – companies with an average of just 12 employees each – who are creating jobs while stimulating the economy and producing much-needed oil and natural gas across the nation.
In particular, independent producers rely on percentage depletion and intangible drilling cost deduction to be profitable and have done so for the better part of a century. It is hard to envision a tax rate on these producers low enough to compensate for elimination the value of these two provisions. Further, smaller independent oil and gas producers account for roughly one-third of domestic production and provide good-paying jobs in Alaska and around the country.
Energy Tax Facts thanks these Senators for recognizing the importance of continued American energy production and the critical role that the current U.S. tax code plays in allowing development to continue.
