Kansas has a vibrant and thriving petroleum industry. Since the first commercial sales of natural gas from the Hugoton Field in 1928, oil and gas have been important to the people of this state. It is for this reason that the Obama administration's move to impose a double tax on the oil and gas industry is all the more troubling.
The United States is alone among its peers in the Organisation for Economic Co-operation and Development in taxing its corporations on their worldwide income. Most nations, in contrast, tax their corporations only on the income they earn in their home county. But if you're a U.S. company, wherever on this planet you make a dime, Uncle Sam is going to get his cut.
In all fairness, the U.S. government does allow American corporations to take a credit on their U.S. tax return for income taxes paid in foreign jurisdictions. Yet in one fell swoop, the administration proposes to do away with those tax credits and, by so doing, effectively double the taxes paid by American corporations with any significant operations in another country.
The oil and gas industry is capital-intensive. It takes millions — sometimes billions — of dollars to develop and bring to market new finds. This new tax will kill exploration and development and have the concomitant effect of driving prices for everything from gasoline to home heating ever higher.
In addition to raising prices at the pump and elsewhere, this tax is a job killer. As investment dries up, there will be less need for everything from roughnecks and roustabouts to tanker drivers. In tough economic times like these, it is incumbent on our elected officials to do what they can to make life easier for workaday Americans, or at least not any worse.
By doubling the tax burden on American companies, we also are effectively halving it on foreign ones. We might think of firms like ExxonMobil, ConocoPhillips and Chevron as mighty titans of industry spanning the planet, but in reality they rank way down on the global hierarchy of energy companies. Indeed, the three largest U.S. oil and gas firms ranked only 17th, 21st and 23rd, respectively. State-owned or formerly state-owned firms such as the China National Offshore Oil Corp., British Petroleum and Saudi Aramco far outrank any American oil firm.
There is something fundamentally un-American about creating and promoting this sort of uneven playing field. We should all stand united against this terrible proposal.