Obama’s tax on oil, gas will hurt the economy

Posted April 19, 2010, at 5:55 p.m.

One of the benefits of serving in a body as diverse as the Maine House of Representatives is that I don’t have to pretend to be an expert on everything. Different representatives bring different experiences and different skills to their work. The flip side is that when issues do arise within my own expertise, I have a responsibility to speak out and help lead. In my day job, I own a heavy equipment dealership — selling and renting industrial and construction vehicles and equipment. It’s a great job: I help people build things.

Unfortunately, an issue has arisen in Washington that I’m afraid will quickly restrict the number of things that are built in Maine and around the country, right when we need our economy to get moving again. It’s called “Section 199,” a tax deduction Congress makes available to companies engaged in “domestic production activities” such as manufacturing companies, including specifically those companies that produce the energy that fuels our economy.

President Obama’s budget includes a proposal to repeal Section 199, but only for oil and gas companies. In other words, the federal government will specifically target our domestic energy companies for what amounts to a tax increase — even in the middle of a recession at a time when we are trying to decrease our reliance on foreign energy. As someone who works in an energy-intensive industry — indeed, at the crossroads between the energy and manufacturing sectors who will be hit by the tax increase — I can tell you it’s a mistake.

Raising taxes on energy companies, the vast majority of which are small businesses, will make it more expensive to produce everything in this country. If the government charges energy companies a higher cost-of-doing-business, those companies will have to recoup the loss by raising the price of their natural resources. The refineries and distributors will in turn raise their prices to the end consumers.

I know this because I’m one of them. When the price of fuel for my trucks and heavy equipment spikes, the price for everything those trucks deliver spikes as well. The more things cost, the less people can afford to buy, and the fewer job-creating private sector projects will be launched. It’s simple mathematics. I know with certainty that increasing the cost of domestic energy in this country will hurt my business, and that it will hurt my distributors and my customers.

But it’s not about me. Consider the situation from a broader perspective. This tax targets “domestic” energy producers and manufacturers, not foreign companies. That means our prices will rise relative to our global competitors, giving them an advantage in the world market. U.S. energy companies will cut back — cut jobs, cut research budgets, cut production. Some smaller energy companies may not survive. Doing this when America’s natural gas market is receiving new investment seems counterproductive.

We won’t have to search far to see the negative impact this will have on job creation and economic growth. In Brewer, Cianbro Corp. is wrapping up its Motiva Refinery Expansion project, which has entailed the construction of about 50 large modules. This project has kept nearly 500 people employed, which means the conclusion of this project will lead to many of those jobs being cut.

Those workers may not have to wait too long for re-employment with Cianbro if another major project like Motiva’s becomes available. But if the president raises taxes on energy companies, the chances of Cianbro, or any other Maine-based company landing such a project, become slim. Energy companies won’t easily be able to afford to expand if they are forced to pay higher taxes to the federal government.

Meanwhile, driving up oil and natural gas prices only encourages consumers to purchase more coal, which burns dirtier and produces more greenhouse gases, or GHGs. This will prove even stickier if the Environmental Protection Agency succeeds in implementing its planned new regulations on GHGs. Under its proposed new rules, GHGs such as carbon dioxide will be treated by local, state and federal agencies as pollution, and even modest producers of carbon — farms, large restaurants and construction companies including my customers — will find themselves bumping up against new regulations that neither the businesses themselves nor the state enforcement agencies are prepared for.

Just when we need to kick-start our economy into recovery, Washington wants to slap it with new taxes, higher energy costs, and unprecedented new layers of bureaucratic red tape.

I may not be an expert about everything, but I do know that makes no sense.

Rep. Mike Thibodeau of Winterport is the ranking member on the Legislature’s Utilities and Energy Committee, representing District 42 (Brooks, Jackson, Monroe, Swanville, Waldo and Winterport). He is a Republican candidate for Senate District 23.

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