While
Members of Congress take their annual August recess, they are not
alone. It's a time for taxpayers to breathe a little easier as
well, because August is at least one month when they know new taxes
and burdensome regulations won't be rammed through the legislative
process.
Right before lawmakers left town, however, the House gave it one last try - passing an energy bill that raises taxes by billions of dollars, increases government subsidies, imposes new mandates, and does nothing to significantly increase the supply of energy.
Consumers and taxpayers shouldered another summer of high gas prices and as a consequence, they hoped Washington would craft responsible energy policies to ease the burden at the pump. Those hopes were dashed when the House and Senate passed bills that, between the two of them, would distort markets and harm consumers.
Whenever lawmakers talk about "energy independence" and express concern for consumers by "punishing" the oil industry with new taxes, Americans should watch their wallets. Many members of Congress are on a "wildcatting" expedition of their own - and they're seeking a huge revenue source for more government spending.
The punitive tax hikes contained in the most recent legislation are even larger than the ones contained in the original tax bill passed in January during the "100 hour" agenda. While the Senate managed to avoid loading these tax hikes onto its own energy bill, House leaders have kept cracking the whip over the back of their favorite victim - so-called "Big Oil."
The bill raises taxes and fees paid to the federal government by oil and gas companies. It does so by eliminating tax deductions and by raising royalties paid for oil exploration in offshore areas under federal control. The House legislation also denies oil companies the ability to use the manufacturing tax credit, currently available to all other industries. Selectively penalizing one industry over another is not only bad tax policy, it's bad energy policy.
History tells us that vengeful tax hikes have no economic benefit. In 1980, Congress instituted a windfall-profits tax, resulting in a drop in domestic oil production of 3 to 6 percent and an increase in oil importation of 8 to 16 percent. Lawmakers ought to be quite familiar with these findings, which come from their own Congressional Research Service. In addition, calculations from the Tax Foundation show that the average effective tax rate on major oil and gas companies is roughly 38.3 percent, as opposed to 32.3 percent for the market as a whole. In light of these statistics, it's difficult to accuse such an industry of failing to pay its "fair share."
Other legislative provisions establish a "Strategic Energy Efficiency & Renewables Reserve," a $30-billion slush fund from which Congress can subsidize what are defined as "clean domestic renewable energy resources." This fund would extend beyond the normal budget, which already includes huge sops to ethanol and "clean coal" technology.
Given the federal government's horrible record on backing successful alternative-energy programs, that $30 billion will likely slip through bungling federal fingers. The fruitless $2-billion "Synfuels" program during the Carter years and the $1.1-billion Partnership for a New Generation of Vehicles under the Clinton Administration are just two examples of tax dollars wasted because petty politics trumped sound science.
Another federal boondoggle is corn-based ethanol, which taxpayers subsidize at roughly $2 billion per year (not counting tariffs and government-usage mandates that create a captive market). Despite acknowledgments that corn-based ethanol won't fuel energy independence, it enjoys a protection racket because of powerful Midwestern Congressmen who twist arms on behalf of "Big Corn."
When Members of Congress return this fall to reconcile the House and Senate versions of energy legislation, they will need to recognize that trying to score rhetorical points by conjuring up villains could push America toward greater dependence on foreign oil and lead to higher energy costs. A sound energy policy means keeping taxes low, eliminating government meddling, and allowing the market to determine which technologies merit investment. Perhaps lawmakers should use their recess to learn that lesson instead of playing games.
Andrew Moylan is government affairs manager for the nonpartisan National Taxpayers Union (http://www.ntu.org), a citizen group working for lower taxes and more accountable government at all levels. National Taxpayers Union has more than 362,000 members nationwide.
