EVERYONE wants "tax reform." But we don't all mean the same thing. When many of us say "tax reform," we are talking about a comprehensive, liberating overhaul of the tax code that leaves Americans less burdened by government, more productive and more prosperous.
Others, though, mean rewriting certain provisions to favor their political allies and punish their perceived enemies.
I'm afraid that the current administration and its friends too often have the latter meaning in mind with the term "tax reform," particularly in regard to taxes paid by American energy producers. If Congress is not careful, it could wind up doing a lot of damage to the U.S. economy in a misguided pursuit of "reform" that is nothing of the kind.
There is a lot of talk about reducing the federal deficit. That is a positive development.
However, one of the methods being discussed is to eliminate so-called "subsidies" for the U.S. oil and gas industries. As proposed, that would be a negative development, and here is why.
What some in Washington are calling "subsidies" are really small tax deductions for investments made in domestic production. These are not cash handouts. They are bipartisan tax provisions written specifically to encourage business investments that create jobs.
This practice is not unique to energy producers. No matter your field, if your business invests in research, development or production, chances are pretty good that the federal tax code allows some level of deduction or credit for such investments.
There is a very good reason for this. These provisions help stimulate economic activity and produce American jobs.
Under attack right now are two important deductions. The first is the Section 199 deduction for domestic energy production. This was passed in 2004 as part of the American Jobs Creation Act. That was no partisan, special-interest bill. It passed Congress by large, bipartisan majorities: 280-141 in the House and 69-17 in the Senate.
Senate Majority Leader Harry Reid, D-Nev., voted for it, as did Sen. Chuck Schumer, D-N.Y. When gas prices spiked years later, Schumer called the deduction a "giveaway" for "Big Oil," and he called for exempting the largest oil companies.