Why on Earth are the Obama Administration and liberals in Congress desperately trying to raise taxes on domestic energy producers? It makes absolutely no sense whatsoever.

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Is now really the time to raise taxes on domestic energy producers? 

Gasoline prices are already near historic highs, and we haven’t even reached peak summer driving season. 

One year ago, the national average stood at $2.86 per gallon, and the price was just $1.84 when Barack Obama entered the White House in January 2009, according to Consumer Reports.  Today, it stands at almost $4 per gallon, more than double its cost two short years ago. 

In addition to high prices that punish American families amid continuing economic adversity, the perils of reliance on foreign sources are by now universally understood. 

With that in mind, why on Earth are the Obama Administration and liberals in Congress desperately trying to raise taxes on domestic energy producers?  It makes absolutely no sense whatsoever.  A fundamental economic axiom states that raising taxes on something discourages its production.  That axiom carries particular weight in the case of domestic energy producers, since so many foreign sources exist. 

Ignoring that logic, Senate Democrats this week attempted to pass a White House-backed bill singling out domestic oil and gas producers for $2 billion per year in higher taxes.  The bill’s sponsors – including the usual suspects Harry Reid (D – Nevada), Dick Durbin (D – Illinois), Charles Schumer (D – New York), Barbara Boxer (D – California) and Al Franken (D – Minnesota) – deceptively claimed to target “subsidies” and “loopholes.”  Naturally, their mainstream media enablers were happy to play along with the charade. 

It is more accurate, however, to say that the proposed legislation sought targeted tax hikes for the energy industry, by selectively denying tax incentives that remain available to manufacturers and industries generally. 

For example, the bill sought to end Internal Revenue Code Section 199 deductions for energy producers.  Section 199 broadly encourages domestic manufacturing and production by allowing deductions for “qualified production activities,” including manufacturing based in the U.S., selling items manufactured in the U.S., licensing motion pictures produced in the U.S. and construction services in the U.S.  As summarized by Nicolas Loris and Curtis Dubay of the Heritage Foundation, “Producers of clothing, roads, electricity, water, and many other goods produced in the United States are all eligible for the manufacturer’s tax deduction.”  So it’s not a “loophole” for “Big Oil,” but rather a universal incentive for domestic manufacturing. 

As another example, the proposed legislation sought to curtail energy producers’ eligibility for the foreign tax credit and deferral, which allows American businesses to avoid double taxation of income.  Additionally, the White House and Congressional Democrats targeted immediate expensing rights for energy companies, which allow businesses to deduct the cost of capital purchases for the year of purchase, rather than forcing them to deduct the cost over years according to complex tax schedules. 

In other words, this isn’t so much a matter of “removing a subsidy” or “closing a tax loophole,” so much as a targeted tax increase for American companies that produce much-needed oil and gas. 

Adding to the absurdity, the proposed legislation stated that, “Congress finds that (1) gas prices have risen significantly largely in response to unrest in North Africa and the Middle East, unrest that speculators are capitalizing on to increase oil futures prices and make huge profits; (2) high gas prices are hurting the quality of life of people of the United States, cutting into savings, and jeopardizing jobs and the economic recovery of the United States.” 

So their answer is to raise taxes on domestic oil and gas companies?  The Congressional Research Service reported in March of this year that Obama’s proposal would increase oil and gas prices for American consumers, but still they persist. 

Moreover, consider just a few of the other wasteful subsidies that the Obama Administration continues to favor.  This week alone, Obama planned to announce new foreign aid from the pockets of American taxpayers to Middle Eastern governments, including $1 billion for “economic activity” in Jordan, another $2 billion to Egypt in the form of debt cancellation and loan guarantees and $2 billion already promised to the region via the Overseas Private Investment Corporation (OPIC).  It was also announced this week that Amtrak’s financial losses continue to deepen, with a projected $1.1 billion loss over this year and next.  Yet Obama continues to promote high-speed rail as the answer to his “Sputnik moment.” 

So billions more in foreign aid, rail sinkholes and other budgetary waste, but higher taxes on energy producers? 

Fortunately, the proposed energy tax bill failed in the Senate this week.  But Harry Reid promised it will be back, and the Obama Administration shows no sign of relenting.  The only question is how high gas prices will be when they attempt to dupe the American electorate again.