By Dustin Gawrylow
BISMARCK -- At times, it seems as though North Dakota's booming economy in the face of national economic stagnation is making us a target for federal policymakers, both elected and unelected.
Case in point: Our state's economy faces a new threat from Congress, which is poised to approve huge tax increases on our domestic energy industry. If implemented, these new taxes would choke off economic growth in North Dakota and jeopardize thousands of good-paying jobs.
A key reason why North Dakota has kept growing despite the recession is our rapidly-expanding energy industry. Oil production has more than tripled in the past three years, and North Dakota now ranks as the fourth-largest oil producing state in the nation.
Rapid growth in the energy sector is creating thousands of new and good-paying jobs. Indeed, officials estimate that the number of workers needed in the oil fields will triple from 1,200 to about 3,600 -- and this doesn't even take into account the hundreds of other jobs that will be created, both inside and outside the energy industry, to support, feed, clothe and house additional workers.
ADVERTISEMENT
In fact, North Dakota may need as many as 10,000 support, auxiliary and service workers to maintain its energy development. And because oil is unlikely to sink below $60 a barrel for any long length of time, the current boom quickly is becoming the new normal.
But despite the fact that the domestic energy industry is one of the only sectors of the U.S. economy that's now creating jobs, American energy producers are becoming the targets of misguided politicians in Washington. To make things worse, many of the proposals would make it harder for American companies to compete against their foreign-owned (and often state-subsidized) competitors. This would make our nation more dependent on foreign sources of oil.
Congressional Democrats are proposing more than $400 billion in new federal taxes and fees on the domestic energy industry. One proposal would change current provisions in the tax code and double-tax U.S. energy producers on the income they earn overseas. If approved, this measure would give foreign oil companies a competitive advantage over American energy producers.
Unlike American companies, foreign companies such as BP would not be subject to double taxation of their overseas income.
In addition, Sen. Max Baucus, D-Mont., has added a provision to the small-business jobs bill to make energy companies ineligible for Section 199 manufacturing deductions. The Baucus proposal, which has the support of senate Democratic leaders, would increase the tax rate paid by American oil and gas companies from 32.9 percent to 35 percent, a multimillion-dollar tax increase.
If approved, the Baucus amendment would do significant damage to our state's domestic oil and gas industry. Imposing higher taxes on oil and gas companies will make these companies less competitive in the global marketplace and reduce their available resources for oil exploration and infrastructure improvements.
In the end, it means fewer jobs, lower wages and less economic growth for North Dakota.
The reality is that higher taxes on energy will end up hurting everybody. More than a quarter of North Dakota's workers are employed by major industries that rely heavily on oil and gas for their energy. Higher energy taxes mean higher prices for these businesses, higher prices at the pump and higher energy bills for homeowners as well.
ADVERTISEMENT
It is particularly ironic that Congress would include a tax increase on domestic energy in a small-business jobs bill. Raising taxes on energy will do absolutely nothing to create jobs. On the contrary, higher taxes will put our nation's economy even farther behind by raising the cost of doing business for everyone and destroying good-paying jobs in North Dakota and other oil-producing states.
Given that Baucus and other key congressional leaders are sponsoring these proposals, we need real leadership from our state's congressional delegation to stop these job-killing tax increases from going into effect. If we want North Dakota's economy to stay strong, this is a fight that we cannot afford to lose.
Gawrylow is executive director of the North Dakota Taxpayers Association.
