Two days ago I participated in a blogger conference call with Dr. Joseph Mason, a professor of finance and the Hermann Moyse Jr./Louisiana Bankers Association Endowed Chair of Banking at Louisiana State University’s E. J. Ourso College of Business.
Since the Deepwater Horizon blowout began spilling oil into the Gulf of Mexico, Mason has been a consistent voice in support of energy industry jobs. A moratorium on drilling in the Gulf could would have devastating results on employment, Mason warns. But that’s not the only threat to energy industry jobs. On Monday Mason released his latest study on tax policy, “Regional and National Economic Impact of Repealing the Section 199 Tax Deduction and Dual-capacity Tax Credit for Oil and Gas Producers.”
Dual-capacity allows oil companies to deduct taxes it pays abroad, something I was able to do when I owned a mutual fund comprised exclusively of foreign stocks. Section 199 allows companies to deduct up to nine percent of their net income derived from domestic oil production.
Okay…so what if the oil industry pays more tax? Well, that puts our nation’s energy industry at a disadvantage. Specifically, Mason argues, “Without it US-based [energy] firms compete on an uneven global playing field against Russian and Chinese firms that receive substantial state support.”
“The higher energy taxes would cost by my estimates,” Mason added, “some $341 billion in lost economic activity and $68 billion in wages.”
Wages means jobs…Just in the next year our economy will lose 150,000 jobs in the next year if President Obama and the Democrats have their way on dual-capacity and Section 199. And they might. Yesterday the Senate struck down an amendment by Florida Senator Bill Nelson, a Democrat who sees the light, to keep Section 199 in place.
As for job losses, where will they come from? Obviously in the Gulf states, but in others too. Texas will lose 38,000 jobs and Louisiana 13,500. But in other states–such as California, the painful effects will be felt as well: 23,000 lost jobs there, as well as 4,000 more in Ohio, Indiana will suffer 3,000 layoffs, and my own Illinois, which is not a big oil producer, will lose 4,500 positions. And that is just in year following the repeal of Section 199 and the dual capacity credit.
I’ll conclude with a quote from Rep. Paul Ryan (R-WI), “You can’t love jobs while hating the people who create them.”
I stole his whole post! I hope John doesn’t mind.