Letter to the Editor

Dennis Schminke, Austin

Regarding your May 13 editorial concerning the U.S. Senate grilling of oil-company CEOs: Oil companies — particularly those involved in production — have enjoyed especially high profits lately, primarily due to high market-prices for crude oil. We can debate the causes of these high prices, from greedy speculators to the misguided energy and fiscal policies of this current administration. The fact remains — the market is the market. The price is where it is because somebody is willing to pay that price. Thus, while oil companies are convenient targets, they should not be singled out for special tax treatment because of their current (and likely temporary) successes. The fact is that the two largest “tax subsidies” in question are open to all U.S. manufacturing companies, not just oil companies.

The first—Section 199 Domestic Production Activities Deduction — was put in place by Congress to encourage U.S. companies to manufacture things domestically rather than send jobs oversees. Oil companies and related industries are doing just that. They employ millions of people in the U.S., and would employ more were it not for the myriad restrictions on development.

Second — the U.S. has among the highest corporate income tax rates in the world. We are also one of the few countries that levy domestic taxes against the foreign earnings of its corporations. The Dual Capacity rules in question allow U.S. international companies to deduct taxes paid to foreign governments on foreign earnings as part of calculating their U.S. tax liability. They were put in place to avoid double taxation, and help level the playing field globally. Again, these rules apply to all companies, not just oil companies.

If Congress is truly serious about deficit reduction, they should be doing more to encourage U.S. manufacturing companies rather than vilifying them. The tax revenues that would accrue from another million people at work in oil and gas development would dwarf the two billion per year that is the subject of these hearings (which, by the way works out to something like a paltry seven-tenths of a cent per gallon.)

The Herald editorialist is right — but for the wrong reasons. Simplify and reform the tax code to take out all of these special provisions — but don’t target a single, unpopular industry.