Louisiana energy interests will suffer, says the state’s two U.S. senators, from Inflation Reduction Act – a massive measure that Democrats are angling to vote on during the next few days before adjourning for the summer.
“It raises taxes on the oil industry by about $25 billion, which of course filters out to gasoline prices,” said U.S. Sen. Bill Cassidy, R-Baton Rouge. “I’m afraid this tax is another step to tamp down our American domestic energy production.”
Every Republican senator opposes the kitchen-sink legislation. For the measure to pass before the August recess, all 50 Democratic senators will have to show up and support the bill, then Vice President Kamala Harris would cast the tie-breaking vote.
The Inflation Reduction Act of 2022 includes the budget reconciliation that only needs a simple majority, 51 votes, to pass.
The legislation was hammered out behind closed doors between U.S. Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, the West Virginia moderate Democrat whose opposition in the past had led Democrats to abandon previous bills. The result is a 700-plus-page measure that contains the Democratic policy wish list.
Democratic senators argue that the bill would reduce the deficit by at least $300 billion; fight inflation; cap at $2,000 out-of-pocket drug prices for seniors; extend the Affordable Care Act and lower its premiums; decrease energy costs; increase energy production; reduce carbon emissions; and incentivize solar panels and electric cars.
“The production tax credits will support renewable development and nuclear, which will help our customers decarbonize and reduce their exposure to natural gas prices,” said Phillip May, head of Entergy Louisiana, the state’s largest utility. “By leveling the playing field for renewable developments with production tax credits, credit transfer ability and avoidance of normalization, the Act will allow for greater customer economic benefits through utility ownership that provides long-term operational flexibility and investment optionality. The Act encourages emerging technologies like hydrogen and carbon capture that will help our industrial customers decarbonize and allow for us to meet our own carbon-reduction goals.”
Up on Capitol Hill, Republican and Democratic senators are flinging at each other conflicting studies that support their positions.
Cassidy quotes from a Wharton School of the University of Pennsylvania budget model that found the bill would result in a slight increase in inflation until 2024, then decrease afterwards “indicating a very low level of confidence that the legislation will have any impact on inflation.”
Democrats point to the Committee for a Responsible Federal Budget analysis that says the bill reduces the deficit along with drug and energy prices, the key ingredients driving inflation. “The Inflation Reduction Act is the largest deficit-reduction bill in over a decade. But it’s only a first step toward fighting surging inflation and tackling our $24 trillion national debt,” said Maya MacGuineas, president of the CRFB.
While families making less than $400,000 won’t see tax increases, loopholes would be closed and the Internal Revenue Service would beef up to better enforce the tax code, according to the Senate Democratic Caucus.
New revenues to pay for all this would be raised from increased IRS tax enforcement and lower prices from prescription drugs. But lion’s share of the $739 billion in new money to pay for the energy investments and deficit reduction would be raised through a 15% corporate minimum tax.
A minimum tax would keep companies from applying so many deductions and credits that their tax liability would be lowered to little or nothing. The corporations can claim their calculations but to no less than 15% of the income on financial statements.
The Washington, D.C.-based think tank, Tax Foundation, which was founded in 1937 by businessmen, calculated the minimum tax would not be spread evenly across the board. Petroleum and natural gas companies would have to pay on average 2.8% more in taxes while utility companies would see their net taxes increase by about 3.8% from 2023 to 2032.
“Yes, this bill does guarantee another 60 million acres to be leased for oil and gas production in the Gulf of Mexico,” said Mike Moncla, president of the Louisiana Oil and Gas Association in Baton Rouge. “But the rest of it is merely par for the course for this administration’s war on the oil and gas industry. Higher taxes, royalties, and penalty fees can in no way be looked at as an incentive to help ramp up domestic production.”
The Louisiana Mid-Continent Oil & Gas Association contends that in 2019, the energy industry supported 249,800 jobs paying $14.5 billion in wages to in-state workers and represented 14.6% of total state taxes, license and fees collected.
“Sen. Manchin’s bill is a massive tax increase on oil and gas. Now, when you tax something, you get less of it. Duh. And his bill is going to make prices go up,” U.S. Sen. John N. Kennedy, R-Madisonville, told Fox News Wednesday. “I don’t think Sen. Manchin intentionally wants to hurt people. I think – I don’t think that he wants more Americans to have to live in a tent behind Whataburger. But that is going to be the result of his bill.”