Joe Biden’s Fiscal Year 2023 budget proposal includes $45 billion in tax increases on the oil and gas industry which the Biden Administration openly admits are designed to discourage investment in domestic production.
Biden’s Treasury Department released an accompanying budget document defending the tax hikes by claiming additional investment in domestic oil and gas production is “detrimental to long-term energy security” of the United States.
This assertion comes despite efforts from the Biden Administration to replace Russian oil with fuel from Iran and Venezuela, two regimes hostile to American interests.
Biden’s Treasury Department also claims it’s acting to protect a “neutral system” from market distorting “tax preferences.”
This justification fails entirely to grapple with the fact that Biden’s Build Back Better agenda passed by the House contains $315.7 billion in proposed green energy tax credits. In contrast, a 2018 report from the U.S. Energy Information Administration found that natural gas and petroleum liquids account for negative five percent of total energy-specific subsidies.
Additionally, the tax provisions Biden would repeal are not subsidies or loopholes but largely ordinary and necessary deductions for operating costs and capital expenditures.
For example, expensing of intangible drilling costs (IDCs), which the Biden budget would repeal, allows oil and gas companies to recover costs such as labor, site preparation, equipment rentals, and other expenditures for which there is no salvage value. Removing such tax provisions would amount to a $10.7 billion tax hike that would pass costs onto consumers in the form of higher gas prices and energy bills when Americans are already facing the highest gas prices since 2008.
Below is the full statement from Biden’s Treasury Department providing a reason for the proposed tax increases.
“These oil, gas, and coal tax preferences distort markets by encouraging more investment in the fossil fuel sector than would occur under a neutral system. This market distortion is detrimental to long-term energy security and is also inconsistent with the Administration’s policy of supporting a clean energy economy, reducing our reliance on oil, and reducing greenhouse gas emissions.”
A full list of the tax increases in Biden’s proposed budget can be found here.