CAP tries to renew a bill of attainder against big oil companies

Oil tanks by Shutterstock

Almost two years ago, we warned against ongoing efforts to undermine the rule of law by singling out unpopular taxpayers for disadvantageous tax rules that don’t apply to anyone else. Recent efforts have targeted five companies – BP, Chevron, ConocoPhillips, ExxonMobil, and Shell – for special tax increases that would apply to no other companies. Congress adopted a rule in 2006, which it tightened in 2007, slowing down write-offs for geological and geophysical expenditures for only the five companies. Bills that would have imposed additional tax increases on the five companies, and only on them, received majority support in the Senate on May 17, 2011 and again on March 29, 2012, although neither bill reached the 60 votes needed to become law.

Apparently, no bad idea ever dies. Last week, Daniel Weiss of the Center for American Progress called for revival of those Senate proposals. His arguments are little different from those made then: Weiss opines that the five targeted companies “can prosper” even if they are singled out for these tax increases and asserts that “they can afford it.” Probably so, but that’s not the issue. A free society must tax all companies and individuals in accordance with the rule of law. It cannot single out unpopular companies for special taxes, even if the taxes are limited to amounts that the targets “can afford” or that still allow them to prosper.

The most egregious targeting concerns the Section 199 domestic-production deduction, which applies to businesses that produce goods (though not those that produce services), except producers of adult movies. Weiss would deny the deduction to the five companies, putting their oil in the same category as adult movies, while leaving the deduction fully intact for every one of the hundreds of thousands of other businesses, including other oil producers, who claim it.

Weiss argues that money taken from the five companies can be used to provide food stamps to working families, veterans, and children. Of course, money seized from unpopular taxpayers can be spent on good things. But so can revenue collected from the general public through neutral tax rules. If additional food-stamp funding is needed, that’s the way to pay for it.

Like, say, the power to close bridges, the power to tax should never be abused for political ends. It is tempting to dismiss a proposal that affects only five unpopular companies as harmless or unimportant. By its nature, though, the rule of law cannot be selectively applied. If it is to protect any of us, it must protect all of us, including BP, Chevron, ConocoPhillips, ExxonMobil, and Shell.

— Kevin Hassett is director of economic-policy studies and Alan D. Viard is a resident scholar at the American Enterprise Institute.

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