The road to economic recovery is not paved with new taxes.
by Mike Biundo
New Hampshire’s delegation in Washington needs to share that bit of cold New England logic with their congressional colleagues as they evaluate the Obama administration’s budget proposal.
That proposal includes a giant energy tax increase, although that’s not what the administration’s economic team is calling it. They’d prefer us to think of it as revising Section 199 of the U.S. tax code. That might sound agonizingly dull, but don’t nod off. The revisions they are looking for amount to a $31.5 billion annual tax increase for U.S. energy producers, and that means more economic trouble for the rest of us.
Does anyone believe that the American energy industry can absorb a tax hit like that and not pass it on to consumers in the form of higher prices? If Congress goes along with this tax increase, the hardest hit Americans will be the middle class families that both parties claim to be so concerned about.
There are too many families in New Hampshire right now worrying about how long they can maintain their middle-class status. Unemployment here is the lowest in the region, but the 5.1 percent rate in January was the highest New Hampshire has seen in 15 years and the trend is going nowhere but up. As one or both parents in a working family lose a job, they don’t need their worries compounded by spiraling prices for gasoline or heating oil.
It’s painful enough when swings in world markets drive up prices for necessities like that, but it’s unforgivable when the price increases are driven by an unnecessary tax increase. Beyond the personal economic problems an energy tax increase would cause for individuals, it makes no sense in macroeconomic terms.
The tax buffs inside the Beltway are punishing an industry that just might be the most productive in America right now. Giant banks and auto companies are firing people in droves even as they accept billions in federal bailout funds. By contrast, the energy industry is supporting jobs and driving economic activity which generates tax money instead of eating it up.
Has paying your own way suddenly become a crime in American business, punishable by a big tax increase? Let’s hope not, but it’s hard to see the logic in discouraging an industy that’s contributing to the economy instead of draining it.
The proposed energy tax increase makes even less sense from the perspective of American energy security. President Obama himself has endorsed the idea of expanded offshore drilling as a means of increasing our domestic energy supply and lessening our reliance on foreign oil. Yet those revisions to Section 199 will raise taxes on offshore drilling and add to the already substantial cost of installing new drilling operations.
This would be a definite step away from securing America’s energy future. Members of Congress can get proof of that from their own in-house analysts.
The Congressional Research Service found that the changes proposed to Section 199 would “adversely affect domestic (oil) production and increase imports.” We would also be passing up the 1.2 million good-paying jobs that expanded offshore drilling would create long-term, along with $8 trillion in economic growth that would produce an additional $2.2 trillion in new tax revenue.
Now that Senator Shaheen is settled in D.C. and Senator Gregg has decided not to join the Obama administration, maybe they could pay a call on the president and tell him that taxes work best when they’re a byproduct of economic growth, not an obstacle to it.
Mike Biundo is a former State Representative from Manchester and currently serves as Chairman of the New Hampshire Advantage Coalition. You can contact him by email at mbiundo@yourmeridian.com
[Content Note – NH economic details taken from 2/26 Union Leader.]
