Report: Obama’s oil company tax proposal would jeopardize thousands of jobs

posted at 8:28 pm on July 7, 2011 by Tina Korbe

Earlier today, I posted excerpts from Florida GOP Sen. Marco Rubio’s excellent floor speech about President Barack Obama’s proposal to address the deficit with tax hikes. Among other things, Rubio asked just how many jobs the president’s proposed tax on oil companies would create. Turns out, energy analysts at consulting firm Wood Mackenzie have the answer.

According to their analysis, increased industry taxation of $5 billion a year (a little off of the approximately $4 billion currently under discussion, but still applicable) would cost the country about 50,000 jobs by 2014, an additional 15,000 by 2020 and 8,000 more by 2025. That doesn’t even take into account the indirect employment effects. Related industries would also suffer staggering job losses – 120,000 by 2014, 35,000 by 2020 and 20,000 by 2025.

Ironically enough, the proposal would also eventually decrease government revenues. While, in the first five years, a $5 billion tax increase would generate an additional $3 billion in revenue each year, by 2020, it would result in an estimated $6 billion less in revenue — and, by 2025, an estimated $10 billion less.

And neither of these effects even touches the effects on production — but that, too, would dramatically decrease, ultimately leading to a rise in gas prices and oil-based products for all of us.

In light of the facts, it’s hard to understand why the administration wants to end these tax breaks for oil companies, other than that it’s easy to make it sound sleazy that the federal government grants “tax subsidies” to oil companies. But, as J.E. Dyer explained so well yesterday, these tax breaks aren’t “subsidies” at all. Furthermore, the tax breaks in question apply to all companies, even though politicians like to make it sound as though oil companies benefit from special breaks. What politicians are actually talking about when they propose “ending tax subsidies for oil companies” is the imposition of a punitive tax on those companies. Why? Because they’re successful? Because they provide thousands of jobs? Because they supply affordable energy for the country? An honest explanation might be nice.


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Eliminate special oil subsidies and give them to solar/nuclear companies instead.

mythicknight on July 7, 2011 at 8:32 PM

In light of the facts, it’s hard to understand why the administration wants to end these tax breaks for oil companies

As he said in the 2008 debate when the moderator explained that a capital gains tax hike actually results in decreased revenue for the government, Obama said he’d hike it anyway “in the interests of fairness.”

Laura Curtis on July 7, 2011 at 8:32 PM

Ironically enough, the proposal would also eventually decrease government revenues. While, in the first five years, a $5 billion tax increase would generate an additional $3 billion in revenue each year, by 2020, it would result in an estimated $6 billion less in revenue — and, by 2025, an estimated $10 billion less.

Not “ironically”… “naturally.”

How many times does the left have to try this crap before the voters catch on to how it will play out?

mankai on July 7, 2011 at 8:33 PM

intended consequences

rob verdi on July 7, 2011 at 8:35 PM

Nothing unintended about the consequences at all…

rightwingyahooo on July 7, 2011 at 8:35 PM

“Unintended” consequences, my fat *ss.

teke184 on July 7, 2011 at 8:36 PM

“In light of the facts, it’s hard to understand why the administration wants to end these tax breaks for oil companies . . . .”
Tina: Are you being coy? Those job losses are a feature, not a bug. Obama wants to destroy America.

GaltBlvnAtty on July 7, 2011 at 8:36 PM

Unintended consequences my arse.

Not one doubt in my mind this is ALL intentional. Every last thing this boob does, is to meet an end. Destruction of America.

capejasmine on July 7, 2011 at 8:37 PM

Intended consequences is right. Why would a statist want people to have private sector jobs? Pshaw.

Philly on July 7, 2011 at 8:39 PM

Get ready to be among the unemployed, Speaker Boehner…

ladyingray on July 7, 2011 at 8:42 PM

Eliminate special oil subsidies and give them to solar/nuclear companies instead.

Yeah. Everyone knows that solar runs 24/7.

As for nukes. Go ahead and try getting a permit. Then hire lawyers to defend against environmental lawsuits.

IDIOT!

GarandFan on July 7, 2011 at 8:42 PM

An honest explanation might be nice.

Since when did honesty or truth have anything to do with this? When a leftist demogogue wants to whip up the public, it’s either oil companies or defense. Followed quicly by the other one.

NeighborhoodCatLady on July 7, 2011 at 8:45 PM

DOTUS…….24/7!

PappyD61 on July 7, 2011 at 8:46 PM

In fairness, any action Obama takes with a clean conscience costs thousands of jobs.

HitNRun on July 7, 2011 at 8:50 PM

Obama – killing one industry at a time

faraway on July 7, 2011 at 8:54 PM

This mad marxist menace must be stopped

faraway on July 7, 2011 at 8:54 PM

An honest explanation might be nice.

BWAHAHAHAHAHAHA.

Expecting honesty out of this Administration…that’s funny.

Queasy on July 7, 2011 at 8:58 PM

I guess the Unions told Obama it’s time to further destroy non-Union jobs in those evil southern red states.

darclon on July 7, 2011 at 8:59 PM

It’s increasingly evident that this brainless cic is an uneducated, arrogant, simplistic juvenile delinquent excersing his authority with the feelings and rationale of a high school student.

A petulant, immature brat.

He sure knows his way around a golf course though.

Twana on July 7, 2011 at 9:00 PM

I think it is and has been perfectly clear that Obama is trying to destroy the oil industry. He has done just about every thing he can do to lower our production. It cannot be coincidence.

Cindy Munford on July 7, 2011 at 9:01 PM

You must all bow down to the Messiah.

That is your fate. You are helpless. Get used to it, peasants!

(The thoughts of George Soros)

technopeasant on July 7, 2011 at 9:05 PM

I know real life stories on this point. I did a post on a fund for wildcats yesterday.

Someone should tell Washington that people actually invest in, work in, and produce in, these industries.

IlikedAUH2O on July 7, 2011 at 9:09 PM

When can we get a countdown clock until the day Obama is gone? C’mon Ed, please.

txmomof6 on July 7, 2011 at 9:23 PM

doubling down on stupid yet again…..

cmsinaz on July 7, 2011 at 9:26 PM

The proof in the last 60 years is that Congress is powerless to harvest much more than 17 percent of GDP in tax revenues – regardless of the tax laws.

If you look at tax revenues during that time – you’ll clearly see that we’ve harvested everything from a “low” of 15% of GDP to a (one year) high of 20% of GDP in 2000.

I think we are spending more than 25% of GDP in government spending – we’ve NEVER taken in that much in revenues – not even close.

Sooo … history PROVES we can collect around 17 percent of GDP (reliably) – some years a point or two more – some years a point or two less. This is consistent REGARDLESS of what tax law is. During times of high taxation – you get about 17% in revenues – during low taxation – about 17% in revenues.

Why isn’t this looked upon as a scientific rule?

Nothing that he (Obama) is going to do is going to improve revenues above that point – nothing. And the reason is – the harder you tax people – the more effort they put into sheltering their income and just plain “going Galt”. When you lower the tax rate – then people relax and tend to work more and produce more – and revenues go up – but still, not more than 19 percent of GDP or so.

So clearly – this comes down to a SPENDING issue. History proves – we cannot resolve this crisis around tax revenues because we’ve been unable to manipulate tax revenues using tax policy of any kind.

HondaV65 on July 7, 2011 at 9:30 PM

If only some Republican lawmakers had the ability to present this information in such a simple and compelling way as TK did in this post.

Is it really so hard for the GOP to go on TV and point out that Obama’s oil company tax will not only kill thousands of jobs but in the long run result in decreased revenues and rising prices at the pumps?

Meanwhile the Democrats still complain about the economy and deficit(!) they “inherited” from President Bush- I’ve yet to see a single Republican go on TV with that chart that shows the deficits under Bush and under Obama. When will they grasp that they not only need better ideas than the Dems, they need to sell them to the American people?

Jay Mac on July 7, 2011 at 10:00 PM

As he said in the 2008 debate when the moderator explained that a capital gains tax hike actually results in decreased revenue for the government

There’s never been any evidence that modestly higher capital gains taxes reduce government income. You’re reciting the nonsensical fantasy of supply-side economics.

When you lower the tax rate – then people relax and tend to work more and produce more – and revenues go up

Not supported by numerous attempts by right-wing economists to prove that slight changes in tax rates actually results in different human behavior. More pure fantasy.

bayam on July 7, 2011 at 10:01 PM

ObaMao has already wreaked his destruction of the oil production in the Gulf. Now, he an his party are attempting to destroy the whole industry with this “pick a target” sound bite. (It must poll well in their focus groups.)

What does he want to do? Eventually nationalize the industry as Maxine Waters blurted out not all that long ago? Will that be how he “saves” another sector that he has destroyed?

But, as J.E. Dyer explained so well yesterday, these tax breaks aren’t “subsidies” at all. Furthermore, the tax breaks in question apply to all companies, even though politicians like to make it sound as though oil companies benefit from special breaks.

Seriously, isn’t his singling out the oil industry for taxation punishment a bill of attainder? The inequities in allowing these tax breaks allowed GE not to have to pay any corporate tax. The ObaMao administration continues to pick the winners and the losers.

onlineanalyst on July 7, 2011 at 10:07 PM

In light of the facts, it’s hard to understand why the administration wants to end these tax breaks for oil companies

Yes, let’s look at the ‘facts’ underlying a study that claims higher taxes will reduce the IRR of domestic oil production to a level where its no longer adequately profitable. You may wonder how this is possible, given today’s high oil prices, and the predictions of many experts (see this week’s Barrons) that oil prices will go as high as $150 sometime next year. Based on the lack of surplus capacity in major oil producing countries and growing worldwide supply from both the West and developing nations, oil prices have nowhere to go but up.

Well, the study makes some very interesting assumptions about the price of oil, which of course determines the profitability of oil production(page 29). First, the study asserts that WTI prices will remain under $90 bbl until the year 2018 (laughable) and will not surpass $100 bbl for another 15 years (absurd). I have trouble believing that so many people would react so strongly to a report that’s based on such fraudulent numbers- unless they didn’t actually check the underlying facts first.

bayam on July 7, 2011 at 10:11 PM

Sooo … history PROVES we can collect around 17 percent of GDP (reliably) – some years a point or two more – some years a point or two less. This is consistent REGARDLESS of what tax law is. During times of high taxation – you get about 17% in revenues – during low taxation – about 17% in revenues.

Wonder if this is why Hong Kong has a fixed rate of … 16.8%

theblacksheepwasright on July 7, 2011 at 10:16 PM

Sooo … history PROVES we can collect around 17 percent of GDP (reliably) – some years a point or two more – some years a point or two less. This is consistent REGARDLESS of what tax law is. During times of high taxation – you get about 17% in revenues – during low taxation – about 17% in revenues.

Wonder if this is why Hong Kong has a fixed rate of … 16.8%

theblacksheepwasright on July 7, 2011 at 10:16 PM

Isn’t the number closer to 18% ?
http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/

bayam on July 7, 2011 at 10:19 PM

To start with get rid of the word ‘would’. So namby pamby. The word is WILL.

Little Nell on July 7, 2011 at 10:34 PM

corporate taxes (what I was refering to) are 16.5 (incorporated) 15 (unincoporated).. I hit 8 by accident…

bayam on July 7, 2011 at 10:19 PM

theblacksheepwasright on July 7, 2011 at 10:44 PM

and the taxes only apply to trading conducted within Hong Kong. HK based corporations who sell outside of HK has 0 tax liability..

theblacksheepwasright on July 7, 2011 at 10:46 PM

Under his plan, energy prices would necessarily skyrocket. Nothing accidental or unintended about it.

Blue Collar Todd on July 7, 2011 at 10:49 PM

I guess the Unions told Obama it’s time to further destroy non-Union jobs in those evil southern red states.

darclon on July 7, 2011 at 8:59 PM

Actually some of the Moratorium protests last summer were held at UNION HALLS. A lot of those equipment manufacturers are union shops. Also, most of the drilling in the NE, like Marcellus Shale in PA is by union crews on the drilling rigs.

So he wants to get rid of Union Jobs too!

Kermit on July 7, 2011 at 11:03 PM

Actually some of the Moratorium protests last summer were held at UNION HALLS. A lot of those equipment manufacturers are union shops. Also, most of the drilling in the NE, like Marcellus Shale in PA is by union crews on the drilling rigs.

So he wants to get rid of Union Jobs too!

Kermit on July 7, 2011 at 11:03 PM

I work in the Gulf of Mexico (for 19 years) and I don’t know of any union jobs. In south Louisiana, there are signs against unions all over the place. None of us want the unions to destroy good thing.

DAT60A3 on July 8, 2011 at 12:34 AM

You must all bow down to the Messiah.

That is your fate. You are helpless. Get used to it, peasants!

(The thoughts of George Soros)

technopeasant on July 7, 2011 at 9:05 PM

I remember why the Scottish use to keep a knife in their sock.

Slowburn on July 8, 2011 at 1:39 AM

HondaV65 on July 7, 2011 at 9:30 PM

Well done!

LegendHasIt on July 8, 2011 at 2:00 AM

Those are intended consequences.

Alana on July 8, 2011 at 3:57 AM

In light of the facts, it’s hard to understand why the administration wants to end these tax breaks for oil companies, other than that it’s easy to make it sound sleazy that the federal government grants “tax subsidies” to oil companies.

Not at all hard to understand, Tina. Just release your inner cynic a bit and it will become abundantly clear. BTW, cynicism is not wrong if you come by it honestly and wade only in the shallow end.

Extrafishy on July 8, 2011 at 6:28 AM

this being the only Obama thread,

Boston Globe

US Immigration 1961 Files
Ann Dunham, was five months pregnant with their child – who would be called Barack Obama II – Obama declared that they intended to put their child up for adoption.

adding insult to injury, there’s no record that Obama Sr. divorced his Kenyan wife as he claimed to officials, and no record of his marriage to Ann Dunham.

maverick muse on July 8, 2011 at 7:04 AM

So,

Collecting 5B$ for 2 years kills 50,000 jobs
200,000$ collected per job eliminated

And the government can create a new job for about 280,000$
per stimulus spending reports last week

What we lose per unit we make up for in volume….

tomg51 on July 8, 2011 at 7:46 AM

In the Øbamanation, taxes are not about raising revenue. Revenue is beside the point. Taxes are about control, redistribution, picking winners and losers and advancing Øbama‘s agenda.

petefrt on July 8, 2011 at 7:48 AM

maverick muse on July 8, 2011 at 7:04 AM

LOL. Now that’s what I’d call trashy ‘humble beginnings’.

petefrt on July 8, 2011 at 7:59 AM

I seriously do not understand the reasoning behind raising taxes on anyone or any business. It makes no sense: the government is going to take money away from individuals and businesses while simultaneously destroying jobs. The only goal that will be achieved by raising taxes is giving the government more money to waste on pet projects or a “stimulus” or it’s just going to go to some crack head from Compton disguised as a welfare payment.

Sleeper on July 8, 2011 at 9:58 AM

Not supported by numerous attempts by right-wing economists to prove that slight changes in tax rates actually results in different human behavior. More pure fantasy.

bayam on July 7, 2011 at 10:01 PM

…like how we pulled out of the 1920 depression (20% unemployment) in 18 months by drastically cutting taxes. Not fantasy, HISTORY!

dominigan on July 8, 2011 at 1:06 PM