Targeted Tax on Big Oil? Bad Idea

In the April 9 issue of Tax Notes AEI economists Kevin Hassett and Alan Viard discuss congressional attempts to impose targeted taxes on the five largest oil companies.

Hassett and Viard make the following points:

No coherent tax policy argument has been offered for singling out these five companies for tax rules different from those that apply to other corporate taxpayers. Instead, the proposed tax increases appear to be the result of political hostility driven by indignation at the oil producers’ high profits and by distress at high gasoline prices.

In a free society, however, government collects revenue from companies and individuals under neutral tax rules, not based on an ad hoc determination that politically disfavored companies or individuals have too much money

The debate on these targeted tax increases is based on several fallacies:

  • It is not true that oil producers can use foreign tax credits when paying royalties to foreign governments.
  • It is not true that the five large companies reap tax savings from “percentage depletion,” as they have been ineligible for this tax break since 1975.
  • It is not true that these tax increases would move the tax system toward neutrality. Quite the opposite, Hassett and Viard conclude that these targeted tax increases pose significant risks to the economy. Many studies have shown that violating the rule of law lowers economic growth and prosperity.


Kevin Hassett is AEI’s director of economic policy studies and is a former senior economist at the Federal Reserve and has served as a policy consultant to the Treasury Department and adviser to the presidential campaigns of John McCain (2000, 2008) and George W. Bush (2004). Hassett is available for interviews and can be reached at khassett@aei.org or though Veronika.Polakova@aei.org

Alan Viard is an AEI economist and a former senior economist at the Federal Reserve Bank of Dallas who has worked for the Treasury Department’s Office of Tax Analysis, the White House’s Council of Economic Advisers, and the Joint Committee on Taxation. Viard is available for interviews and can be reached at aviard@aei.org.

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About the Author

 

Kevin A.
Hassett
  • 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
    Email: khassett@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202-862-5862
    Email: emma.bennett@aei.org

 

Alan D.
Viard
  • 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, TheAtlantic.com, 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
    Email: aviard@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202-862-5903
    Email: regan.kuchan@aei.org

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