CAP "Study" on Tax Reform and Energy Companies Is Shoddy and Wrong


Posted by Ryan Ellis on Thursday, July 26th, 2012, 12:38 PM PERMALINK

The Center for American Progress Action Fund has a study out today in which they argue that Mitt Romney's tax reform plan is a $4 billion giveaway to "Big Oil."  Not only is that factually-inaccurate, but the logic the study assumes to get there is shoddy.

The logic of the study is the following:

  1. Romney has proposed cutting the corporate tax rate from 35 percent (the highest in the developed world) to 25 percent or less
  2. Romney has also proposed ending corporate deductions and credits in the context of corporate tax reform
  3. But we all know Romney loves Big Oil, so we assume he won't end any tax preferences for large energy companies

That is a heck of leap, to say the least.  From this shoddy assumption, the authors show that oil companies will save $4 billion in corporate income tax.  But even this is wrong.  The sum total they arrive at for Big-Five oil company tax savings is actually $2.3 billion.  Yes, they even get their own study's arithmetic wrong.

Putting that aside, why is this assumption--that large energy companies will get the rate reduction but not the base broadening--wrong?  Simply put, tax reform of that magnitude will result in base broadening for all classes of taxpayers.  No company or industry will have access the same tax benefits as before ALONG WITH the lower marginal tax rates.  That's simply not how big tax reform projects work.  In real world tax reform, everyone gets lower rates, and everyone has fewer tax benefits than before.

To assume that five companies will alone be shielded from the business end of tax reform is absurd.  CAP should be ashamed of the work they've produced here.

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