The President’s Most Regressive Tax Yet
President Obama has presented his last budget proposal to Congress, and it again targets the U.S. oil and gas industry by adding a new $10 per barrel tax on crude oil.
Nevermind that this tax doesn’t stand a chance of getting approved by Congress, and is in fact just a last gasp attack of a lameduck president who for the last eight years has done everything possible to stymie a successful industry while taking credit for that same industry’s successes.
Let’s focus instead on where the president proposes the money should go. He’s suggesting that the oil tax be used to fund $300 billion worth of investments in “clean transportation” over the next decade, including increased funding for high-speed rail and “autonomous vehicles.”
That’s right. The president is proposing a new tax that could raise the cost of gasoline by 25 cents a gallon, harming seniors and lower income Americans who spend disproportionately more of their money on energy, all in order to give companies like Google, Tesla and Uber the ability to develop self-driving cars that most people won’t be able to afford.
And he’s suggesting throwing taxpayer money towards projects that would provide little benefit to the average American worker, such as Tesla’s Hyperloop, a high-speed rail project which will connect Hollywood to Silicon Valley and Amtrak’s plans for bullet trains to make it faster to get from Washington D.C. to New York. Notice that neither of these projects would “help reshape our transportation landscape” in middle America where working class families have to drive to get to their jobs and are currently enjoying low prices at the pump brought about by the renaissance on U.S. energy production and refining.
As Forbes.com, senior editor Christopher Hellman said, it’s unfortunate
“that in the country with the world’s deepest capital markets, our political leaders think we need regressive taxes to fund the buildout of driverless cars and charging stations. The president likes to pal around with his billionaire buddies who run Tesla Motors and Google. Can’t they afford to build these things on their own without picking our pockets?”
I’ve pointed out previously a University of California Berkeley study that found that the $18 billion the government has spent on subsidies for clean energy technologies so far — including federal tax credits, renewable portfolio standards, state-level subsidies for hybrid and electric cars — has done little to alleviate the high cost of energy on America’s poorest citizens, and in fact, “over the last decade U.S. clean energy tax credits have gone predominantly to higher-income Americans.”
Even during this period of low gas prices, lower-income families put a much higher percentage of their income towards gas. A study by JP Morgan found that families that make less than $30,000 a year spend 5.6 percent of their monthly income on gas, while families that make over $80,000 a year only spend about 1.5 percent of their income per month on gas.
There have been reams written on the President’s new gas tax proposal. But the word I keep coming across most often (and which is perhaps the most accurate description) is “boondoggle,” including this post from the Institute for Energy Research, who notes:
“… you don’t create good paying jobs with a $65 billion annual tax hike, the proceeds of which are used to fuel boondoggle spending projects on items that wouldn’t survive in the open market.”
The better path to additional revenue for the federal government from the industry isn’t higher taxes, its more production, particularly opening more federal lands for development and installing a reasonable structure for obtaining drilling permits.
According to a number of analyses, including one by Wood Mackenzie, increased domestic oil and natural gas development could supply revenues for government that would dwarf the proceeds from energy tax hikes like those proposed by the president — $127 billion by 2020 and more than $800 billion by 2030.
More revenue for governments, as well as more jobs and economic stimulus, come from choosing right on energy development — by fostering more activity, not less. Paying more in taxes won’t make our infrastructure better or our environment cleaner. It will just make our pocketbooks a whole lot leaner.