Higher Energy Taxes Will Hurt The Economy

York County’s population continues to expand at a steady rate and York County remains one of the fastest-growing counties in Pennsylvania. From 2000 to 2009 the county experienced a population increase of 12.4 percent compared to the state average of 2.6 percent. Take a survey of York County’s industries – manufacturing, construction, transportation and warehousing – and it will show nearly 30 percent of our workforce is employed in the energy sector.
These facts and figures make it easy recognize the importance of affordable energy to our region’s families and businesses. However, affordable energy is not an issue specific to York County. Where businesses choose to open and expand is often dictated by the cost and reliability of energy.

Throughout Pennsylvania, we’re doing our part to embrace abundant, domestic energy. In 2011, Pennsylvania produced more natural gas than we consumed, marking the first time in more than a century that the commonwealth met its own natural gas demand. Pennsylvania also has a rich history as a nuclear, coal, oil, wind and solar energy producer. All these combined position Pennsylvania as a model of modern energy production.

Unfortunately, once you leave York County, head south and enter the confines of the D.C. Beltway, it’s apparent many of our federal policy makers don’t view the energy industry as the backbone of our economy.

During the so-called fiscal cliff debate and now in the midst of the debt ceiling debate, the energy industry is often targeted for new government revenue – meaning “new taxes.” We often hear elected officials talk about ending the subsidies for “big oil.” It’s important to understand that oil and gas tax provisions or deductions are not subsidies.

David Blackmon published a thought-provoking column in Forbes earlier this month explaining the difference between tax treatments and subsides. Blackmon explains that it is a big misconception put forth by President Obama that oil and gas tax treatments, many almost a century old, are somehow unique to the oil and gas industry.

One example Blackmon cites is the Manufacturer’s Tax Deduction referred to as Section 199: “The Section 199 provision was enacted by Congress in 2004 as a means of encouraging manufacturers to relocate overseas jobs to the U.S. and is in no way specific to or limited to the oil and gas industry. In fact, the oil & gas industry’s ability to take advantage of this provision has already been singled out for limitation – in 2008, Congress reduced the industry’s deduction under this provision to two-thirds of what other manufacturing industries are allowed to deduct.”

Pete Sepp of the National Taxpayers Union discusses energy tax policy extensively. He points to the Congressional Research Service, which noted that “about one-third of all corporate activity in the United States qualifies for this [Section 199] deduction. Almost any U.S. corporation that manufactures, grows, refines or generally produces goods used by consumers, could avail itself of this provision.”

Another anti-energy proposal frequently bandied about is the elimination of tax credits to U.S. energy firms earning income in foreign counties. The scheme here is to change existing “dual capacity” rules. Essentially, we would require American companies to not only pay foreign taxes on foreign income, but pay taxes again on that income to the U.S. Requiring American energy companies to pay taxes twice doesn’t make sense. It hurts our energy companies’ competitiveness and gives foreign energy companies a distinct advantage in the marketplace.

Lower energy costs are making American manufacturers competitive again. Jobs are returning to the U.S. and this phenomenon gives rise to a new term in the American vernacular: “onshoring.” These new jobs enable us to grow our economic base. More pay stubs mean more taxes flowing to Harrisburg and Washington, D.C.

In order to “grow the base” we need sound energy policy to support America’s energy producers and job creators.

A growing population and resurgent economy require all the energy America can produce. By supporting policies that embrace domestic energy companies and production, we build confidence in energy price stability. We will attract new businesses and enable existing businesses to expand. This will ultimately put more money in taxpayers’ pockets.

Chris Reilly is a York County commissioner.

Nothing presented here should be considered an an attempt to aid or hinder the passage of any legislation.

The views expressed here are those of the author and not necessarily those of the Susquehanna Valley Center.