PrintAugust 16, 2010
Government Tax Lunge Would Eliminate Jobs
From the experience of the Great Recession, we should have learned that uncertainty combined with high energy prices has a broad and sweeping effect on the economy. Added costs mean that consumers have less disposable income. This forces businesses to cut costs and jobs as revenue drops, while they simultaneously see higher costs in the form of increased energy bills. Additionally, a significant strain is put on every American family who depends on affordable energy for transportation as well as lighting and heating their homes. Clearly, it is in America's best interest to have affordable energy; and if that energy can be produced and refined domestically, we have the added benefit of more American jobs and improved energy security.
Therefore, it is quite startling that a president who declared that his number one priority this year would be job creation, has proposed and supported policies that will increase uncertainty in energy markets, reduce incentives to invest in energy jobs at home, and drastically raise energy costs for consumers and businesses. The Obama Administration's 2011 budget includes a policy change regarding the rules governing dual capacity tax payers -- that is, companies that pay taxes around the world -- that would eliminate the credit against US income tax liability for income taxes paid in foreign jurisdictions. The result will mean billions of dollars of additional taxes on our domestic energy suppliers' global operations to the advantage of foreign owned companies. Following suit, Senator Baucus (D-MT) has proposed the repeal of a domestic manufacturing tax credit that rewards companies for keeping jobs in the US. Repeal of the Sec. 199 tax credit, included in a so-called "Small Business Jobs" bill, would not only eliminate domestic jobs but raise energy costs on all Americans. This is a terrible idea as the nation is already teetering on the brink of a double-dip recession.
The energy industry alone supports 9 million jobs in the US and contributes more than $1 trillion to the U.S. economy. The multiplier affects of affordable energy go even further, sustaining millions more jobs and acting as a steady base upon which our economy can grow. According to a study by the Institute for Energy Research, the immediate impact of the repeal of Sec. 199 incentives would be the elimination of 637,000 jobs and, over 10 years, a reduction of US household earnings by a staggering $35 billion.
These policy changes may seem irrelevant to many; but their potentially dangerous consequences will hit home in the form of higher bills, reduced job security, and more uncertainty for businesses. Massive tax revenue grabs by the federal government also fly in the face of the administration's professed commitment to create jobs and revive our moribund economy.
Bernard L. Weinstein, Ph.D. is Associate Director, Maguire Energy Institute, Cox School of Business, Southern Methodist University, Dallas, Texas
