Energy Bill Tax Provision Won't Increase Consumer Prices
December 5, 2007
11:57 AM
This week, Congress will be taking up the energy bill, which includes important tax incentives designed to speed up the use of renewable energy, improve energy efficiency and help reduce carbon emissions.
The tax package in the Energy Independence and Security Act of 2007 is carefully constructed to avoid causing any increase in the prices that Americans pay for oil, natural gas and gasoline. The Joint Economic Committee analysis of Section 199 in particular found:
- This proposal does not increase taxes for any but the five largest integrated oil and gas producers. There is no increase for independent (non-integrated) domestic producers. The proposal maintains their tax benefit under Section 199 at its current level.
- The adjustment of Section 199 will not have an effect on consumer prices. The repeal of Section 199 for the largest integrated producers would not affect the cost per unit of producing oil and gas, which is the metric on which firms make production decisions. Because the proposal will not affect production, it will have no impact on price.
- The magnitude of the change in the taxes that repealing Section 199 represents is so small relative to earnings that it will not discourage investment in domestic oil and gas production. Record-high oil prices will continue to generate robust profitability in this industry, which will continue to attract investment dollars that will sustain (or increase) domestic production levels.
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
# # #
