America’s oil and natural gas industry supports 9.2 million jobs and 7.7 percent of our nation’s GDP. The industry provides higher-than-average wages and helps ensure our nation’s energy security. In the process, the industry generates tax revenues that contribute billions of dollars every year to federal, state and local government.
As a tremendous source of revenue that fuels the U.S. economy, major energy producers pay their fair share: the oil and natural gas industry pays income taxes, royalties and other fees totaling nearly $86 million every day. The industry also pays the federal government significant rents, royalties and lease payments for production—totaling more than $100 billion since 2000.
Supporting our economy, U.S. energy companies pay income taxes at an effective rate far higher than most other manufacturing companies. In 2011, oil and natural gas industry income tax expenses (as a share of net income before income taxes) averaged 40.6 percent, compared to 25.1 percent for other S&P Industrial companies.
There is a choice when it comes to planning for our energy future. One path is increasing access to America's resources so that we can create jobs, raise government revenues and produce more of the energy we use right here at home. The other path involves increasing industry taxes by removing standard business deductions—not only for a specific industry, but also for specific companies within that industry.
According to the report commissioned by the American Energy Alliance, higher energy taxes would mean:
- $341 billion in lost economic output from 2011-2020
- 155,000 jobs lost in 2011 and 115,000 each year thereafter until 2020
- $68 billion in lost wages from 2011-2020
- $83.5 billion in reduced tax revenues to government
In the long run, the negative economic consequences of higher taxes more than offset any short-term tax revenue gains. A study by energy consulting firm Wood Mackenzie shows that with increased access to America’s natural resources, we could add nearly $194 billion in new revenue to the U.S. economy by 2025.
Click here for more information about current tax issues facing the oil and natural gas industry.
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Economic Consequences of Higher Taxes