October 24, 2012
By Derrick Morgan
“If it moves, tax it if it keeps moving, regulate it and if it stops moving, subsidize it.”
President Ronald Reagan’s axiom about how Washington deals with the economy accurately describes the current administration’s approach to energy production.
The United States has the world’s largest reserves of traditional fuels, and our energy sector is booming. Domestic oil production is up, and natural gas is so abundant that its price is now one-fourth of what it once was. But those welcome developments come in spite of – not thanks to – Washington. The good news arrives courtesy of “fracking,” the new technology of hydraulic fracturing.
With our nation’s economy still sputtering, you would think the White House would be doing all it can to encourage more jobs and investment in the booming sector of traditional fuels. Think again.
President Obama is delaying the Keystone XL pipeline that would connect North America’s abundant oil fields with refineries in Texas. His administration continues to hit the coal industry with draconian regulations that have forced companies, including American Electric Power Co. Inc. and FirstEnergy Corp., to close power plants throughout Ohio and the East. Meanwhile, entrepreneurs and workers are denied access to oil fields located offshore (only 2 percent currently open to production) and on federal lands (3 percent open for exploration).
And then there’s the carbon tax. The Environmental Protection Agency still threatens to implement regulations that will increase the price and decrease the ability to use fossil fuels so that administration-favored green energy companies, at least the ones that are not already bankrupt, can survive. And on Capitol Hill, green enthusiasts have introduced a carbon-tax bill that, according to Capital Alpha Partners, would add more than $5 to the price of a gallon of gasoline over a 12-year period.
Imagine paying $8 a gallon each time you fill your tank. Mr. Obama’s Energy Secretary Steven Chu finds that vision quite appealing. Before he was nominated, Mr. Chu said he wanted U.S. gas prices to rise to European levels – currently more than $8 a gallon in Germany. When pressed to defend his comment, he acknowledged that he wanted to reach those prices “gradually,” and now he’s repudiated his original view.
No matter the tax rate in the short run, Americans know that once started, taxes tend to increase. For example, the federal income tax, with rates approaching 40 percent today, started at only 1 percent for the vast majority of ratepayers and a top rate of 7 percent. A carbon tax, like other types of hidden taxes, would be relatively easy for politicians to slowly raise since the tax would be imposed on companies. Politicians could easily blame the energy companies for the increased prices. The real question is: Why do some in Washington want to stifle investment in a growing industry – one in which the U.S. could lead the world – while simultaneously increasing our gasoline and electricity bills?
Some want to implement a carbon tax to help tackle the deficit, while others want to use its revenues to lower taxes on capital gains, income or corporations. Both of these ideas fail to properly consider that a carbon tax would be regressive: The poorest among us would suffer the greatest harm because they must spend a disproportionately large amount of their income to cover energy costs. A carbon tax also hits people in rural areas especially hard, since they must drive longer distances. Why saddle these groups with artificially high prices? Indeed, it will be a tough job to convince average Americans to pay higher prices at the pump and on their energy bills all for the purpose of lowering taxes for corporations, especially for no noticeable environmental benefit in return.
The simple fact is that Americans cannot afford the burden of a giant carbon tax. We stand at the brink of a renaissance in the production of traditional fuels. Expanding access to oil, coal and natural gas will create good-paying jobs and can reduce energy prices. All Washington has to do is get out of the way.
• Derrick Morgan is vice president of domestic policy at the Heritage Foundation
First appeared in The Washington Times.
Vice President for the Institute for Economic Freedom and Opportunity
Read More >>
Request an interview >>
Please complete the following form to request an interview with a Heritage expert.
Please note that all fields must be completed.
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute,
with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in
February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free
enterprise, limited government, individual freedom, traditional American values, and a strong national
defense. Read More
© 2014, The Heritage Foundation Conservative policy research since 1973