For the second year in a row, President Obama has his tax sights set on the oil and gas industry. In the proposed fiscal 2011 budget submitted by the Obama Administration this past week, the President has included $36,500,000,000 (zeros included for emphasis) of oil and gas taxes. For an analysis of the breakdown of these taxes, see Nick Snow’s article in Oil & Gas Journal.
The President continues to believe that a good way to grow our economy and spur job growth will be to cause businesses to send more money to the federal government than to spend it in the free enterprise system. The tax increases for the oil and gas industry are the same as the ones I wrote about last March and include:
- Repeal of percentage depletion,
- Eliminate expensing of intangible drilling costs,
- Extend the amortization period for geoligical and geophysical costs,
- Repeal the domestic manufacturer’s deduction (only for oil and gas companies),
- Remove the exception to passive loss limitations for working interest owners in producing properties, and
- Repeal the enhanced oil recovery credit and the credit for production from marginal wells.
It seems to me these proposals will have the opposite of the President’s stated desired impact. These types of policies will most likely result in fewer jobs, reduced government revenue, a shift away from domestic production to foreign production, and more reliance of foreign sources of energy.
