Plan to end oil industry tax breaks draws fire

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The debate over eliminating tax breaks for the oil and gas companies is heating up, with an industry group saying Monday that the move could cost the energy sector thousands of jobs.

President Obama signaled last week that his administration could pay for $180 billion in recently proposed economic recovery measures by closing tax loopholes for major corporations, including tax breaks and subsidies for oil and gas producers.

However, the proposed tax changes could have "grave economic consequences," according to a study from the American Energy Alliance, which lobbies for the oil and gas industry.

The study, based on research from Louisiana State University economist Joseph Mason, says the proposed changes will trigger an initial loss of 154,000 jobs in the energy sector and related fields by the end of next year.

In addition, the changes would result in more than $340 billion in lost economic output, and $68 billion in lost wages nationwide, according to AEA and Mason.

"The Obama administration aims to single out U.S. oil and gas firms and raise the cost of energy for consumers by eliminating crucial tax credits to which all taxpayers are entitled," Mason said in a statement.

The proposals that the industry objects to are an elimination of a manufacturing tax credit and a modification to the rules for "dual capacity taxpayers," which are primarily oil and gas firms that make "tax like" payments to foreign governments.

According to research from Concept Capital, ending the manufacturing credit would add $15 billion to the federal coffers, while changing the dual capacity rule would raise $8.5 billion. The administration has proposed using that money to offset the cost of new tax breaks for small businesses and infrastructure spending, among other things.

Those who support closing the loopholes argue that the oil and gas companies are among the most profitable in the world, and that the costs could be easily absorbed.

"American taxpayers are currently giving money to BP, Shell, Exxon and others by virtue of these subsidies," said Kert Davies, research director at Greenpeace. "Correcting that and making them pay those costs will allow a more level economic discussion."

In addition, he pointed to the thousands of jobs that could be created by subsidizing the development of alternative sources of energy, which is a stated goal of the Obama administration.

But critics say the changes would unfairly penalize minor energy firms and hurt small businesses that rely on big oil and gas companies for their survival.

Alex Morris, an analyst at Raymond James who covers big oil companies such as BP, said it's hard to say exactly how the proposed changes will impact the industry, although he expects there to be some job cuts as a result.

"Any time you eliminate millions of dollars in tax credits, the loss will have to be made up somewhere else," he said. "At some level, there will be an impact on employment." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,718.80 0.26 0.00%
Nasdaq 4,872.12 -4.40 -0.09%
S&P 500 2,060.74 -0.31 -0.02%
Treasuries 2.01 0.09 4.53%
Data as of 3:35pm ET
Company Price Change % Change
Bank of America Corp... 15.44 0.04 0.23%
Apple Inc 124.29 0.91 0.74%
Micron Technology In... 26.70 0.12 0.47%
Intel Corp 30.11 0.22 0.74%
Cisco Systems Inc 27.09 -0.37 -1.35%
Data as of 3:19pm ET
Sponsors

Sections

Lots of attention is paid to college graduation rates of lower-income students, but many middle-class kids don't finish their bachelor's degrees either. More

This credit card has a battery, chip and screen to display a dynamic CVV code. The point? Stopping fraudsters. More

Startup PredictifyMe's groundbreaking technology could help protect against school bombings More

Home price appreciation has been outpacing wage growth in the last two years , which means it's getting harder to afford buying a home. More