Study says higher oil, gas taxes won’t help debt problem

President Obama’s proposals to raise taxes on oil and gas industries to reduce the federal government's $1.3 trillion annual deficit will cause a loss of 155,000 jobs, $68 billion in lost wages, and $83.5 million in reduced tax revenues.

So says Louisiana State University economist Joseph Mason who released a study today that examined the effects of Obama’s proposition to eliminate tax deductions on oil and gas companies.

Obama has suggested that such revisions will raise about $30 billion in tax revenue over the next 10 years. But that’s not the whole story.

The administration’s 2011 budget proposal contains two items which Mason contests. The first is the exclusion of oil and gas companies from Section 199 of the American Jobs Creation Act. Section 199 allows taxpayers to receive a tax deduction for qualified domestic production activities.

The second Obama proposal would change the so-called Dual Capacity rules that are meant to help U.S. companies compete with foreign firms by allowing them to avoid paying taxes on profits both domestically and abroad.

While Obama would have Section 199 exemptions for only oil and gas industries, the president wants Dual Capacity rules changed for companies in all industries

Mason’s study is based on the premise that: “When a company has to pay $1 more in taxes, it must take that amount from other sources: reducing workers’ pay (either through wage cuts or layoffs); reducing the returns on shareholders’ investments (through lower share price or dividends); and/or reducing its purchases of inputs.”

Because the oil and gas industries play such a huge role in the U.S. economy (in 2008, it contributed about $1 trillion to the economy), tax increases on those firms would have a huge effect on other industries, according to Mason. Jobs would be lost across industries from agriculture to manufacturing.

“The administration’s proposal to eliminate tax deductions on U.S. oil and gas companies is grossly counterproductive toward the goal of increasing federal revenues,” Mason said in a news release about his study issued by the American Energy Alliance, an energy industry advocacy group. The AEA sponsored the Mason study.

“Such a move would have a net negative impact on revenue, thereby increasing federal deficits,” he said. “If the goal is deficit reduction, a far more meaningful approach would be reforming federal tax and business policies that encourage economic growth.

“Expansion of oil and gas exploration and production on the Outer Continental Shelf, for example, would generate an estimated $11 billion annually in Federal tax revenue in the short run, and $55 billion annually in Federal tax revenue in the long run.”

Mason's study shows the Obama proposals would fail to meet the goals of increasing tax revenue, and would actually result in a net loss of $53.5 million in tax revenue. At the same time, implementing the proposals would damage the U.S. economy as a whole, as well as the energy industry.

You can read the complete Mason study here.

Beltway ConfidentialenergytaxesUS

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at

Just Posted

After the pandemic hit, Twin Peaks Boulevard was closed to vehicle traffic, a situation lauded by open space advocates. (Kevin N. Hume/S.F. Examiner)
New proposal to partially reopen Twin Peaks to vehicles pleases no one

Neighbors say closure brought crime into residential streets, while advocates seek more open space

Protesters rally at the site of a proposed affordable housing project at 2550 Irving St. in the Sunset District on Saturday, Jan. 23, 2021. (Ming Vong/S.F. Examiner)
Sunset District affordable housing discussion flooded with ‘scare tactics and hysteria’

Project would provide 100 units, some of which would be designated for formerly homeless families

Members of the Sheriff’s Department command staff wore masks at a swearing-in ceremony for Assistant Sheriff Tanzanika Carter. One attendee later tested positive. 
Courtesy SFSD
Sheriff sees increase in COVID-19 cases as 3 captains test positive

Command staff among 10 infected members in past week

Rainy weather is expected in the coming week. (Kevin N. Hume/S.F. Examiner)
Rainstorms, potential atmospheric river expected to drench Bay Area in coming week

By Eli Walsh Bay City News Foundation Multiple rainstorms, cold temperatures some… Continue reading

U.S. Poet Laureate Amanda Gorman’s powerful reading was among the highlights of Inauguration Day. (Kent Nishimura/Los Angeles Times/TNS)
Inauguration shines light in this never-ending shade

Here’s to renewal and resolve in 2021 and beyond

Most Read