Increase Federal Revenue By Increasing Energy Production, Not Raising Taxes

By Senator Alan Olson
Published: Tuesday, February 12, 2013 2:41 PM CST

America’s energy producers have been a favorite target of the liberal left for the last few years, even as we’ve seen the incredible job creation produced by the Bakken economic engine.  Technological innovations, like horizontal drilling and hydraulic fracturing, have created an economic boom in many parts of the country and contributed mightily to our otherwise flagging GDP.

What thanks does the energy industry get for their contributions to job creation and economic opportunity?  They are continually threatened with a litany of arbitrary and punitive tax policies that would harm jobs and impede economic growth.

And now the Obama administration is once again ramping up the rhetoric on raising taxes on the energy industry.  Obama and his allies are dusting off some of the same tax schemes that have been rejected before due to the economic harm they would cause our country.  Despite that harm, the left needs more tax revenue to feed the massive government growth created in the past four years, and that planned in the years immediately ahead. They view the energy industry as that old, reliable easy target.

Make no mistake, the incredible government debt racked up during this administration must be addressed, in part through constrained spending and part through increased revenue.  Note that I said more revenue, not higher taxes.

And it’s this same energy industry that is poised to provide a large infusion of new tax revenue if it is allowed the natural expansion that the marketplace wants.  We don’t need to tax energy more—we just need to open all production opportunities.

A recent report by the Institute for Energy Research shows just how much potential exists to increase government revenue.  IER’s study examined energy production opportunities on federal land and waters that are currently off limits.  They found that expanding energy production opportunities could produce $2.7 trillion in federal revenue, and an additional $1.1 trillion in state and local tax revenue over the next four decades.

That’s even more revenue than the various energy tax proposals that have been floated by Democrats.  It seems to me that if we are serious about reducing government debt by increasing tax revenue, then the reasonable way to accomplish this is to increase production, not increase taxes.

But government tax revenue isn’t our only concern; in fact for most people it’s a secondary concern.  The study also showed that opening energy production opportunities on federal property would create over half a million new jobs by the end of this decade, and result in a net increase of $900 billion over the same time period, compared with the status quo.

Increasing energy taxes would have the opposite effects on jobs and GDP.  As energy companies absorb a higher tax burden, they have less capital available to invest in labor, research and development, and new technology.  That adds up to fewer jobs and a potential decline in GDP.

Finally, increasing energy production increases the supply of energy, which in turn drives down the cost of energy for consumers.  That leaves households with more money to spend elsewhere in the economy.  It also means that energy intensive businesses, like manufacturing, have that much more capital on hand to create jobs.

Obviously, raising taxes on energy would have the opposite effect on energy prices as the cost of the taxes are passed on to consumers.

Those calling for higher taxes on the energy sector in the name of increasing government revenue need to be honest.  There’s a way to do it without the side effect of job losses, lower GDP and more costly energy.  In fact, opening new drilling opportunities has great potential to greatly benefit our economy and our country.

Senator Alan Olson represents Senate District 23, which includes parts of Yellowstone and Musselshell Counties.  He is the chair of the Senate Energy and Telecommunications Committee.


Author: montanaoilreport

After my first job at a newspaper -- delivering papers for the Jackson (TN) Sun, ink was in my veins. Since the 1970's I've worked in every area of the Printing and Publishing industry, with most of that time spent in the pressroom. In 2008 I moved to Montana and purchased the Sun Times of Fairfield ( In 2011 I realized that most media outlets were either ignoring, or attacking, the growing oil and gas industry in Montana, so I started the Montana Oil Report as the source of information on this important industry.

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