The US oil and gas industry needs a gut-level response to President Barack Obama's raid, under the banner of fairness, on its finances. The response doesn't have to make logical sense; Obama's fairness campaign doesn't. It just has to stir voters disinclined to spend their spare time reading tax law.
In a Sept. 19 speech on deficit reduction, Obama waged class warfare so heavily that he felt obliged to deny preemptively that he was doing so. "I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share," Obama said. This isn't class warfare? Only to "the usual defenders of these kinds of loopholes," the president insisted only moments before specifying classes: "I believe the American middle class, who've been pressured relentlessly for decades, believe it's time that they were fought for as hard as the lobbyists and some lawmakers have fought to protect special treatment for billionaires and big corporations."
Raising taxes
Those specially treated "big corporations" include oil and gas companies, of course. The American Jobs Act, which the administration sent Congress earlier in September and for which Obama's speech was seeking support, would implement longstanding efforts to boost taxation of oil and gas companies, including small producers and royalty owners. Portrayed as "subsidies" by the administration, the targeted preferences are, in fact, historic adaptations of tax law to the financial quirks of oil and gas production.
Obama persistently implies that measures such as rapid expensing of intangible drilling costs, credits for nontax payments to foreign governments, and a manufacturer's deduction available to other industries keep the industry's tax rates uniquely low. Hence his repeated appeals to make "big corporations"—especially oil companies—pay their "fair share." Yet effective tax rates are higher in the oil and gas industry than in many others. Citing data from Compustat, the American Petroleum Institute reports that income tax expense in 2010 as a share of net income before income taxes averaged 41.1% for oil and gas companies. For Standard & Poor's industrial companies in other businesses, the average was 26.5%.
On that basis, Obama, if he really wants to uphold fairness, should be arguing for lower oil and gas taxes. He won't, of course. And, confident that tax-rate comparisons won't capture much notice, he'll keep amplifying his arguments with appeals to fairness.
To fight this, the industry needs more than logic and facts. It needs a straight path into mass discourse, a counterpunch against Obama's fairness jab that's comparably provocative. It should start accusing Obama of elitism.
What better describes this president and his administration? And what better rebuke to flawed policies can there be than to expose the condescension that propels them? Americans, native egalitarians that they are, will squirm.
Yes, the argument amounts to name-calling. It's unsophisticated, to be sure. But it's more defensible than fairness assertions grounded in falsehood.
Problems of perception?
Elitism explains the administration's consistent preference, in issues ranging from health care to energy, for governmental decisions over individual choice. It explains how an Environmental Protection Agency administrator can claim, while discouraging work with a torrent of regulation, to be creating jobs. It explains how the president can, in a speech earlier in September on employment, call for the elimination of tax credits and deductions in service to tax reform while proposing new credits and deductions to stimulate job creation. It explains, indeed, how he can insist that an industry taxed more heavily than most others profits unfairly from the tax code.
Maybe Obama and his colleagues think they'll never be called to account for excesses few will notice. Or maybe they're so sure they're right that they construe observations about contradiction as problems of perception rather than thought or deed. Elitists think like this. The oil and gas industry can safely assume that most Americans do not.
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