Andrew Moylan
Politics often mimics theater. And – displaying elements of drama, intrigue, and a fair bit of fantasy – this month's elaborate production by Senate Democrats to frame oil companies as the reason for high gas prices merits a Tony nomination.

Beyond entertainment, the push to single out U.S. oil and gas firms for additional tax burdens holds little value.

In fact, if the Senate were to pass the kind of proposal it voted on this week, the Congressional Research Service warns that American consumers would face higher energy costs and greater reliance on imports. Echoing that concern, S&P notes the public will ultimately pay the price in limited supplies and rising prices for lawmakers playing politics with energy policy.

Washington’s debate over so-called oil "subsidies" signifies a fundamental misunderstanding about who pays taxes in America. University of Michigan economist Mark Perry emphasizes that real people, not corporations, ultimately pay taxes. Higher taxes on any industry – particularly a sector such as energy which feeds into every aspect of our economy – translate to higher prices for consumers, lower wages and fewer jobs for employees, and/or lower returns for shareholders.

These realities hardly qualify as common knowledge. And because taxes are a very complex issue, special interest groups can easily exploit public confusion. The liberal-leaning Center for American Progress, for example, tries to paint major oil companies' tax burden as "lower than the average American’s." Yet, federal data shows that’s just not the case.

A 2008 report by the U.S. Energy Information Agency shows the 27 major energy producing companies surveyed bear an effective tax rate of 40 percent – a whopping 14 percentage points more than the average rate of all U.S. manufacturers. The American Petroleum Institute reports that for 2010, oil and gas companies paid effective income taxes of more than 41 percent.


Andrew Moylan

Andrew Moylan is Vice President of Government Affairs for the National Taxpayers Union.