Last Friday, the NAM submitted comments on Senate Finance Committee Chairman Baucus’ Energy Tax Reform discussion draft. Since manufacturing accounts for nearly one-third of the energy consumed in the U.S., Manufacturers could not let this draft go by without a strong statement that any tax reform plan must allow our nation’s energy producers to make the necessary investments to ensure our country’s energy security and that reform should not increase the tax burden on this vitally important industry sector.
Echoing our cost recovery comments this submission emphasizes the need for policies that support capital investments – such as those that are regularly required to produce energy – and that those policies must support all types of energy production. This is even more important today as thanks in large part to the investments and developments in shale gas production, the abundance of increased low cost energy and raw material is producing a competitive advantage today for many manufacturers and other energy consumers. Tax policy must reflect the fact that finding and producing domestic oil and natural gas are requires large and ongoing capital investments. Current policies that allow, for instance, intangible drilling costs (IDCs) to be deductible as ordinary business expenses are the types of policies that will continue to allow companies to make the investments necessary to develop these resources.
Further, because as we support incentivizing investment, we also oppose policies such as a carbon tax that seek to penalize production. Such a punitive tax would impair the ability of U.S.-based producers to compete in a global marketplace, would increase energy prices and would have a negative impact on economic growth. This was a key finding of a study, “Economic Outcomes of a U.S. Carbon Tax” undertaken for the NAM last year by NERA Economic consulting.
The NAM is a strong champion of domestic energy production as well as efforts to promote energy efficiency and develop renewable sources of energy, and has long pointed to the important role a favorable tax climate plays in achieving these goals. As we look towards comprehensive tax reform the ultimate goal should be the creation of a tax code that is pro-job, pro-growth and pro-competitiveness and policies that support the development and investment of energy resources will help us attain that goal.