Authors on 'intellectually bankrupt' charge: Not ready to file yet!

Article Highlights

  • The Internal Revenue Code does not include any tax provisions that benefit only the five large oil companies

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  • Section 167(h)(5) of the Internal Revenue Code treats the 5 big oil companies less favorably than other taxpayers

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  • By its nature, the rule of law cannot be selectively applied. If it is to protect any of us, it must protect all of us

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To the Editor:

In a recent letter,1 Martin Lobel describes as "intellectually bankrupt" our arguments against S. 940 and S. 2204, two recent bills that would have imposed unfavorable tax rules on five large oil companies that would not have applied to other taxpayers.2 Unfortunately, Lobel mischaracterizes our analysis of why the bills violate the rule of law.

Lobel asks whether the "authors would apply the same rule of law to tax expenditures that benefit only a few powerful entities like 'Big Oil'." Yes, we would certainly condemn provisions singling out a few taxpayers for more favorable treatment than other taxpayers as offensive to the rule of law. At the risk of stating the obvious, however, that hypothetical example has no relevance to the issue at hand. As we documented and as Lobel is undoubtedly aware, the Internal Revenue Code does not include any tax provisions that benefit only the five large oil companies. And it is safe to assume that none will be adopted, given that no senator or representative has introduced or expressed support for any such provisions. What the code does include is section 167(h)(5), which treats the five companies less favorably than other taxpayers. If enacted, S. 940 and S. 2204 would have added several more provisions singling out the five companies for less favorable treatment than other companies.

Lobel asks whether we are "really arguing that once Big Oil or some other powerful interest group gets a tax subsidy, they are entitled to keep it," inexplicably overlooking our emphatic statements that it is perfectly appropriate to remove or limit tax benefits for all affected taxpayers.3 The problem with S. 940 and S. 2204 is not that they would have denied the five companies benefits that they now have; the problem is that they would have targeted the five companies based on their unpopularity and denied them benefits that would have been left in place for other taxpayers.

Lobel also asserts that the tax benefits altered by S. 940 and S. 2204 arose from "politics," not because "they can be justified on economic grounds." As previously stated, we agree that the section 199 deduction, the largest tax benefit altered by the bills, reflects "an economically arbitrary preference for goods over services."4 We noted, however, that the deduction's economic defects do not justify denying it to five unpopular companies while leaving it in place for other businesses, a point to which Lobel offers no response.

A simple analogy may clarify the relevant distinctions. We oppose the enactment of tax expenditures that benefit only Martin Lobel. We do not maintain that Martin Lobel is entitled to keep a tax benefit once he gets it. We recognize that the current form of the mortgage interest deduction arose from politics and cannot be justified on economic grounds. At the same time, we emphatically believe that it would violate the rule of law to deny Martin Lobel the mortgage interest deduction while leaving it in place for other taxpayers. Does Lobel really view that position as intellectually bankrupt?

By its nature, the rule of law cannot be selectively applied. If it is to protect any of us, it must protect all of us, including BP, Exxon Mobil, Shell, Chevron, ConocoPhillips and Martin Lobel.


Kevin A. Hassett
Senior Fellow and Director of
Economic Policy Studies
American Enterprise Institute

Alan D. Viard
Resident Scholar
American Enterprise Institute
Apr. 23, 2012



Martin Lobel, "Lobel Rebuts 'Rule of Law' Defense of Big Oil," Tax Notes, Apr. 16, 2012, p. 369.

2 Kevin A. Hassett and Alan D. Viard, "Big Oil, Targeted Taxes, and the Rule of Law," Tax Notes, Apr. 9, 2012, p. 217.

3 Id. at 222 and 226.

4 Id. at 225.

Click here to view the letter as an Adobe Acrobat PDF.

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About the Author


Kevin A.
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.

    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
  • Assistant Info

    Name: Emma Bennett
    Phone: 202-862-5862


Alan D.
  • Alan D. Viard is a resident scholar at the American Enterprise Institute (AEI), where he studies federal tax and budget policy.

    Prior to joining AEI, Viard was a senior economist at the Federal Reserve Bank of Dallas and an assistant professor of economics at Ohio State University. He has also been a visiting scholar at the US Department of the Treasury's Office of Tax Analysis, a senior economist at the White House's Council of Economic Advisers, and a staff economist at the Joint Committee on Taxation of the US Congress. While at AEI, Viard has also taught public finance at Georgetown University’s Public Policy Institute. Earlier in his career, Viard spent time in Japan as a visiting scholar at Osaka University’s Institute of Social and Economic Research.

    A prolific writer, Viard is a frequent contributor to AEI’s “On the Margin” column in Tax Notes and was nominated for Tax Notes’s 2009 Tax Person of the Year. He has also testified before Congress, and his work has been featured in a wide range of publications, including Room for Debate in The New York Times,, Bloomberg, NPR’s Planet Money, and The Hill. Viard is the coauthor of “Progressive Consumption Taxation: The X Tax Revisited” (2012) and “The Real Tax Burden: Beyond Dollars and Cents” (2011), and the editor of “Tax Policy Lessons from the 2000s” (2009).

    Viard received his Ph.D. in economics from Harvard University and a B.A. in economics from Yale University. He also completed the first year of the J.D. program at the University of Chicago Law School, where he qualified for law review and was awarded the Joseph Henry Beale prize for legal research and writing.
  • Phone: 202-419-5202
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    Name: Regan Kuchan
    Phone: 202-862-5903

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