Senate Democrats, who apparently think budgeting is like inaugurating presidents in that it’s only to happen every four years, have finally said they’ll pass a budget in 2013 after four years of not budgeting at all. Which the sort of had to do since Republicans are making Senate budgeting a prerequisite of a debt ceiling hike, but Democrats are saying they’ll only pass a budget that has more tax hikes.
And who would be the target of these tax hikes? The rich, naturally, but also the energy industry, one of the few bright spots in our national economy:
The proposed tax increases to be included in the Senate budget would be on the wealthy, oil and gas companies and corporations doing business overseas, Schumer said.
The increases on the wealthy, which Schumer did not spell out, would be in addition to the rate increase on income over $450,000 a year that Congress voted on at the beginning of the month during the fiscal cliff fight.
Senate Democrats tried, and failed, to raise taxes on the oil industry last year. Whether or not the Senate can pass them this year indexes directly to the number of democrats from energy-producing states who are up for re-election in 2014.
What Democrats have attacked before, the supposed “subsidies for big oil” we’re always hearing about, are a couple of deductions that are crucial for keeping US oil companies competitive in global markets.
One is the dual capacity tax credit which allows US-owned oil companies to reduce their tax burden here by the amount they pay in foreign taxes. Believe it or not, US “big oil” is actually a small slice of the global market which is mostly dominated by state-owned oil giants like Citgo (Venezuela). Expecting US oil companies to pay both foreign taxes, and domestic taxes, would put them at a serious competitive disadvantage, having to essentially pay double taxation.
Another “subsidy” Democrats have wanted ended in the past is the Section 199 manufacturing deduction. This is policy which benefits far more than just the oil industry. The deduction is available to all US companies that manufacture, grow, refine, or otherwise produce including software companies and coffee growers (even Starbucks gets this deduction).
The oil industry receives the Section 199 deduction at a 6% rate, as opposed to the rest of the industries who take the deduction (fully 1/3 of all corporations operating in the US) at 9%.
The deduction is for income derived from property manufactured, produced, grown or extracted in the United States. Basically, if you make something, you can deduct 9% of its value (6% if you’re in the oil industry) from your taxes.
The energy industry in America is surging. Oil production grew more in 2012 than in any other year in US history. The number of gas wells in the United States has grown almost 38% in the last decade. All of this production is creating jobs, spurring commerce and driving energy prices down.
And we’re going to attack that with tax increases?