Oil-and-Gas Industry and Tax Breaks

Here’s another post comes from a Wall Street Journal debate/point-counterpoint piece.  This time, though, I think the question itself is too narrow, limited as it is to oil and gas subsidies.  The imbalance in the WSJ question is illustrated by this claim from President-On-The-Way-Out Barack Obama (D):

Not only has President Barack Obama repeatedly called for a repeal of much of the oil-and-gas industry’s favorable tax treatment, his budget proposal for fiscal 2017 included a new $10-a-barrel fee on oil to help fund low-carbon infrastructure projects.

Mark Perry, of the American Enterprise Institute and a Professor of Economics in the University of Michigan-Flint School of Management, made the case for continuing these tax breaks, centering his argument on using taxes to create incentives to do Government-favored things in an otherwise free market.

Tax incentives are essential for unconventional oil-and-gas production, and there would have been no shale revolution without them.

Then Perry had this remark in disparagement of those who oppose the oil-and-gas industry generally:

For climate crusaders who view oil and gas as a problem instead of the lifeblood of our economy, rejiggering the tax code is seen as a catalyst for restructuring the energy economy.

Compare that with Perry’s claim quoted just above it.  Perry wants to use exactly the same tool—the tax code—merely to do precisely the opposite.  His own contradiction is just an argument for getting the tax code out of the market place.

Ryan Alexander, President of Taxpayers for Common Sense, is on the right side of this question, but too narrowly so.

The tax breaks that Congress provides on income derived from or devoted to certain activities are designed to encourage that specific activity. But what they end up doing is distorting economic decision making and rewarding activity that would occur even without the special treatment.

But it’s not just oil and gas energy.  Low-carbon infrastructure projects and other “green”-related energy enterprises do not need subsidies, just as oil and gas enterprises do not.  If these sorts of enterprises—even industries—can’t compete on their own in a free market, they’re not ready for production or sale.  Market forces alone—including market forces that pushed $100 oil into a fracking boom—are sufficient to determine whither oil, gas, and “green” energy, and any other aspect of a free market.

No, taxes have no business being used for social engineering, or market manipulation, or managing private business decisions, or anything at all other than funding government so it can do its three constitutionally mandated tasks.

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