Tim T. Schowalter: Obama’s slippery oil math
April 4, 2012
To the Editor:
Obama is out campaigning again for higher taxes on oil and gas. Obama is trying to make a scapegoat out of the American oil industry for votes. His words are pure propaganda and more taxes would be counterproductive.
Once again Obama shows his ignorance of economics and taxation. You tax something you want less of. If we have less domestic oil production, we have fewer jobs, lower tax income, and have to buy more oil from overseas and are ever more dependent on our enemies to run our economy.
Obama talks like raising taxes on oil will solve all our problems. Let’s look at the numbers.
Obama’s new taxes would raise about 4 billion dollars a year. That would be about 0.1 percent of our over $3 trillion budget. Another way to look at the oil tax income is to compare it to how much Obama gave away in the stimulus bill for renewables, about $8 billion. So, it would take two years of the new tax income just to pay back the tax money given for renewables. And about half of that has already been wasted in companies that went bankrupt.
As we only produce 1 percent of our electricity from oil, giving wind and solar tax subsidies does nothing to reduce our dependency on foreign oil. Bill Hamilton’s recent article reported the key numbers to remember. Renewable energy gets 68 percent of the government energy tax breaks and fossil fuels get 15 percent.
Have there been any new tax breaks for oil and gas? The answer is no. The only change over the years is that the depletion allowance has been reduced for independents from 32 percent to 15 percent and has been eliminated for major oil companies. Obama’s new taxes would eliminate the depletion allowance and the ability to write off intangible drilling costs. The tax structure for the American oil industry is very similar to the taxes on U.S. manufacturing companies. Changing the oil tax structure would really kill jobs in small oil companies that drill over 90 percent of the U.S .wells and would not significantly affect the major oil companies.
Obama says that reducing demand will reduce the price of oil. But he also says increasing supply will not. Mr. President you can’t have it both ways. We should be drilling and reducing demand.
Tim T. Schowalter