Baucus tax proposal hurts energy industry


It started out as an ambitious plan. Senator Baucus’s “clean slate” approach to federal tax reform had initial support from interests on both sides of the aisle. It was supposed to overhaul our bloated, incomprehensible tax code. It was supposed to clean up the hodgepodge of tax credits, lower tax rates and make the entire structure more equitable for everyone.

But now it’s shaping up to be a major disappointment. And worse, the final tax plan could have terrible consequences for Montana’s economy.

Bits and pieces of the reform have broad support. Like dropping the corporate tax rate, which is the highest in the world, down from 35 percent to a more internationally competitive level.

But the latest “discussion draft” being circulated in Washington has resulted in more contention than consensus. Of particular concern to Montana are a slew of proposals that single out the oil and gas industry for some pretty rough tax treatment.

The energy industry is already one of the most heavily taxed in the nation. They’d be hit even harder if the proposals in the Baucus draft were adopted. The result would be the end of tax policies designed to encourage investment in energy exploration and job creation.

With Montana on the cutting edge of oil and gas exploration, the tax changes in the Baucus discussion draft would have a deeper impact here than in most other states. Job growth in Montana would be stunted; growth in tax revenue that has kept Montana’s state and local budgets in the black would drop off; and our overall economic growth would be curtailed.

But the proposals in the current draft could be just the beginning for Montana’s oil and gas industry. Additional tax changes that single out energy companies for disparate tax treatment have been proposed in the past few years that would have an even greater impact on the industry.

The idea of fair tax treatment had been a cornerstone of Senator Baucus’s tax reform package. But it appears that same idea has been superseded by Washington’s insatiable bad habit for picking winners and losers through federal tax policy.

Case in point, those expensive tax subsidies that have been used to prop up the wind and solar industries would be continued under the Baucus plan. In effect, the alternative energies that have already cost taxpayers billions will get additional handouts, and the industries that have been driving job growth in our country will be squeezed even harder.

Only in the alternative universe of Washington, D.C. would it make sense to put hobbles on an economic engine that works, like the energy industry, through arbitrarily increasing their tax burden. While at the same time rewarding companies that have already shown they’re not reliable.

The Baucus discussion draft for tax reform is a bad idea, and it could get even worse. It’s time to embrace the ideal of equity once again. Though we need a more simplified tax code, the federal government should not be in the business of picking winners and losers or propping up some industries at the detriment of others. 

Let’s see a true “clean slate” approach again. Let’s see tax cuts and elimination of outdated, confusing tax policies and loopholes. A rewrite of the tax code, if done right, will result in a substantial boost to our struggling economy. As it stands, the Baucus proposal would actually do the opposite.

All wealth comes from the ground. Whether it is agriculture or natural resource development. The crops that we raise or the resources we extract from the ground affect everything we do. To add more taxes to oil and gas only adds to the cost of everything from the food we eat to transportation, to the by-products use in manufacturing. At a time when America is working towards energy independence, I find it odd that we as a country would want to increase costs on our domestic production.  

EDITOR’S NOTE: Rep. Duane Ankney is the chairman of the Montana House Appropriations Committee. He represents House District 43, which includes parts of Yellowstone, Treasure, Rosebud and Custer counties.