The People of America's Oil and Natural Gas Indusry

The Fleecing of the Industry

Jane Van Ryan

Jane Van Ryan
Posted July 16, 2010

True story: A few days ago I went into a women's clothing store to buy a couple of T-shirts. As I was standing at the counter paying my bill, the clerk decided to make small talk. "Do you work in Washington" she asked. "Who do you work for?"

I answered, "I work for the oil industry."Her friendly demeanor faded. She put my purchase in a bag and had nothing more to say.

The clerk is one of many, many Americans who are troubled by the Deepwater Horizon accident. The leaking well in the Gulf and the tar balls on the beaches have had a major impact on America's collective psyche. But the clerk didn't take out her consternation on me. She didn't charge me more than other customers or slap an extra tax on my purchase. That would have been unfair and unlawful.

Some members of Congress, however, are trying to exploit the Gulf spill and change existing law to raise taxes on the oil and natural industry.

The new taxes would be placed on top of the existing tax burden, which already is the highest in the nation. Oil and natural gas companies pay an effective tax rate of 48.4 percent. Contrast that with the tax rate of 28.1 percent for all other companies in the S&P Industrials.


One of the tax provisions that could be changed is a tax deduction enacted in 2004 to encourage ALL U.S. manufacturers and producers to invest in their businesses and create more jobs. A proposal under consideration would repeal this deduction ONLY for the oil and natural gas industry. There is no defensible reason for singling-out this industry and treating oil and natural gas activities differently than other industries' activities.

Officials also want to reinstate the Superfund tax, which would place a tax on every barrel of oil consumed in the United States.

These tax changes were proposed in the president's 2011 budget several months ago. They're being discussed on Capitol Hill this summer because lawmakers are trying to turn a crisis into a funding opportunity for the federal government.

If the tax changes are enacted, oil and natural gas industry taxes would rise by $80 billion and reduce the amount of money available to create jobs, conduct research, produce secure domestic energy and raise energy costs.

Read more about the proposals to increase taxes on the oil and natural gas industry in the briefing paper below.