On Tuesday, November 10th, the U.S. Senate Finance Committee held a hearing on "Climate Change Legislation: Considerations for Future Jobs" where Sen. Hatch (R-UT) introduced for the record Americans for Tax Reform’s (ATR) testimony.
The testimony focused on loss of jobs, negative economic impact to the economy, and punitive taxes on one form of energy over others. The full testimony is below and the PDF version can be viewed be clicking the link below.
Tuesday, November 10, 2009
My name is Grover G. Norquist, and I am the founder and President of Americans for Tax Reform. ATR was founded in 1985 at the request of President Ronald Reagan and serves as a non-partisan organization that opposes any and all tax increases.
I would like to thank Senator Orrin Hatch (R-UT) and his office for introducing this testimony in the Congressional record for this hearing. The Cap and Trade legislation this Committee is considering is being sold as an attempt to control the climate; however there is no conclusive proof that it will have any effect. There is, however, considerable evidence that this legislation will have a disastrous economic effect on the country. This proposal, S. 1733, the “Clean Energy Jobs and American Power Act,” will negatively impact the economy, hurt families, and kill jobs. It will also make the United States less competitive in the global marketplace while allowing other countries to take the lead with an unrestrained economy.
A recent Freedom of Information Act (FOIA) request, issued by the Competitive Enterprise Institute (CEI), to the U.S. Treasury Department revealed that the government’s internal reports estimate a cap and trade program will cost between $100 to $200 billion dollars in new taxes per year. This is the equivalent of a hike in personal income taxes by about 15% and the average American household would pay an additional $1,761 a year. Another study by The Institute for Energy Research (IER) found that Waxman-Markey will increase taxes on electricity from coal and natural gas-fired power plants by $1 billion.
Americans will also feel increased pain at the pump as a result of this legislation. A study by Senators Kay Bailey Hutchinson (R-TX) and Kit Bond (R-MO) found that the Waxman-Markey bill will result in a $3.6 trillion gas tax. That breaks down to an additional $2.0 trillion tax on gasoline, a $1.3 trillion tax on diesel fuel, and a $330 billion tax on jet fuel.
These massive new taxes on energy producers and every American family will be far more destructive to those in the lower and middle class. On September 12, 2008, then candidate-Obama said, “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your
payroll tax, not your capital gains taxes, not any of your taxes.” However, candidate Obama also said, “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.” The President’s own Treasury Department noted that the increase in rates would be the equivalent of a 15% personal income tax increase by raising an estimated $100 to $200 billion per year.
Candidate Obama was right. Prices will skyrocket, and it will be those that make less than the $250,000 that will be harmed the most.
As the Hutchinson-Bond report explained, the average household spends five percent of its annual budget on fuel costs. For most lower and middle class working families, gasoline is necessary to get to work and make a living. These families also tend to have longer commutes than the rich and will be hit harder by increased fuel costs.
The Institute for Energy Research has found that the Waxman-Markey bill will result in a $14 billion redistribution of resources from the poor to the rich. This is primarily because shareholders and those involved in trading allowances will be in a position to make money, while those with lower incomes will be paying for the increased taxes and costs.
Additionally, I urge you to oppose punitive taxes on the energy sector over other sectors of the economy. These taxes could come in many forms. A repeal of Section 199 of the Internal Revenue Code, but only for energy companies, will segregate one sector of the economy from getting a domestic manufacturers tax deduction available too all other manufacturers. Removing this tax deduction will pass a $13.3 billion tax onto every American family. According to Paul Schlather, a senior tax partner with PricewaterhouseCoopers, “Every small business in the manufacturing industry should be looking at this as a tax deduction. While Section 199 comes with a very complex set of rules, chances are small businesses will qualify for the deduction much easier than the rules depict.”
Second, there have been discussions and proposals to increase the amortization period of the cost of geological expenses incurred in connection with oil and gas exploration within the U.S. According to IRS Publication 535, “Business Expenses”, the current law states: You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the U.S. These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. For major integrated oil companies (as defined in section 167(h)(5)) these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007).
Increasing the amortization period to seven years for only energy producing companies, is the equivalent of a $1.1 billion income tax increase once phased in.
Raising taxes on oil companies by increasing the amortization period of geological and geophysical (G&G) expenditures makes U.S. oil and natural gas exploration projects less competitive globally, thereby discouraging new U.S. production and increasing the nation’s reliance on imported oil. Almost all large oil and gas companies are publicly-traded entities, whose shares are owned by millions of investors through their 401(k) plans, retirement plans and pension funds. Taxing away the earnings of those companies negatively impacts the ability of hard-working Americans to achieve a more financially secure future.
Increased energy costs and regulatory burdens are going to destroy jobs in America, sending them overseas to countries like China and India. The Black Chamber of Commerce estimated cap and trade would kill over 2.7 million jobs every year through 2030. The Heritage Foundation estimated 1.1 million jobs lost from 2012- 2030 and 2.5 million each year after that. Even the liberal Brookings Institution estimated 1.7 million jobs would be lost per year.
We are told that these job loses will be offset with new “Green Jobs.” The Institute for Energy Research has released a study about the “Green Jobs” program in Germany, and found that not only are these jobs costly, they are also unsustainable. Government subsidies for the solar industry have had a net cost from 2000-2010 of $73 billion (US$) and wind subsidies have cost $28 billion (US$). When compared to the US economy, which is five times the size of Germany’s, we can see that it would cost us approximately half a trillion dollars. The entire wind and solar industry is dependent on government handouts including the “Green Jobs” we are told are created from this scheme. The government must pay an estimated $240,000 (US$) for every solar employee. As soon as the government handouts go away for these jobs, so do the jobs. Not only do these new jobs create a new class of people dependent on government welfare, they also kill productive jobs. A Heritage Foundation study has estimated that net job losses, jobs that will be destroyed even if we take the government-dependent “Green Jobs” into consideration, will be 1.145 million.
Increased burdens on lower class families will also come in the form of new regulations on home sales. The Waxman-Markey bill contains 397 new regulations, one of which requires almost all homes to undergo environmental inspections prior to sale. These inspections will increase home prices, as additional inspections and repairs increase base prices. This cost increase is passed on to the buyers making home ownership more difficult. This will also eliminate the “fixer-upper” type homes upon which many low income buyers depend. Many low income families buy less-than-perfect homes because they are cheaper and they can perform needed repairs and improvements themselves. If the home has to pass an inspection prior to sale, the seller will have to make all of the necessary improvements before selling the home. The cap and trade proposal considered today will make home ownership nearly impossible for millions of Americans.
Beyond the direct economic impact of this energy tax, it will also dramatically change the American way of life. Increased travel and commuting costs coupled with an increase in cost to heat and cool homes and keep the lights on means many families will have to make a major shift in priorities. They will also have limited discretionary income for consumer purchases. Families will be forced to live in smaller houses and drive smaller cars. Communities will be constricted because of increased commuting costs, and people will have fewer employment opportunities.
With a void in U.S. based jobs, and the global economy continuing their demand, these manufacturing jobs will go to countries such as China who not putting economic-shackles disguised as climate change legislation on their economies. While the U.S. is imposing higher taxes and energy costs on its citizens and businesses, China is increasing its production and carbon emissions. The result will be the US committing economic suicide while having no proven effect on the climate.
As the United States considers economic destruction and China continues to prosper, what will we gain for all of our sacrifice – increased job loss, higher energy costs and an increased burden on already strained American families? Climatologists estimate that the cap and trade energy tax this Committee will soon consider will at best lower the world-wide temperature by hundredths of a degree by 2050 and no more than two-tenths of a degree by the end of the century.
On top of not reducing the temperature, it also won’t reduce our usage or dependency on fossil fuels. In 2015, the US is expected to consume 127 billion gallons of gasoline. As a result of cap and trade, by 2050 we would consume 100 billion gallons of gasoline. In 2015, however, we will use 78 billion gallons of diesel fuel and 31 billion gallons of jet fuel. In 2050, we will use 118 billion gallons of diesel and 48 billion gallons of jet fuel. While gasoline consumption is expected to slightly decrease, diesel consumption will increase by 30 billion gallons, and jet fuel consumption would increase by 17 billion gallons. A recent Environmental Protection Agency (EPA) analysis of the Senate Kerry-Boxer draft concluded that “average household consumption [of energy] would be reduced by less that 1% in all years.”
This bill is not about creating jobs; in fact it will destroy jobs and cripple the economy. This bill is not about helping the planet or reducing dependency on foreign oil. This bill is not about national security. As New York Times reporter John M. Broder wrote, “Cap and trade… is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts.” This bill is about increased political power, plain and simple. It will raise taxes and energy costs on every American family and force more jobs to our economic competitors.
We believe in an “all of the above” energy approach that incorporates a diverse blend of energy sources without raising taxes and/or increasing the regulatory burden on businesses and without growing the size and scope of the federal government. Thank you.