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Congress Punishes American Oil

By Steve Forbes

In a relentless resolve to craft national energy policy, House Democrats last week passed an energy tax bill for the third time and the bill is headed to the Senate. With oil clearing the $100 benchmark and ongoing instability in key oil producing regions of the globe, politicians in Washington want credit for some form of energy legislation, even if it is wrong for the country. What Congress has really concocted is a transfer of wealth scheme that raises taxes on oil companies to provide subsidies to "alternative energy." The bottom line on their latest energy fiasco is that it raises taxes on select oil companies, spares foreign oil companies the same tax increases and hands over subsidies to some of the largest companies in the country who will benefit from the "renewable" tax credits.

This $18 billion tax increase concocted by Congress includes a provision that takes away a manufacturing tax credit - which companies across the board can use - from only the five largest oil companies. As bad as it is to raises taxes for the energy industry during an economic slowdown, a tax increase that's only aimed at specific companies undermines energy security by putting a handful companies at the mercy of competitors across the globe.

Even more outrageous, foreign oil companies, including Citgo, owned by the government of Venezuela, will not lose the deduction. In other words, foreign oil companies with US production will actually pay a lower tax rate than American companies. How can members of Congress support legislation that will reward companies such as Citgo, while placing U.S. companies at a competitive disadvantage? In their zeal to punish "big oil" members of Congress have made a mockery of our energy policy.

If congressional leaders succeed in this approach, it will set a terrible precedent for greedy politicians to start targeting specific companies as their source of revenue. Energy policy is not a game of diplomatic dodge ball - the federal government can not pick and choose winners and losers.

The intent of these tax hikes is to promote "alternative energy." What few in Congress have talked about is that millions in subsidies will go to large and successful companies. These companies have been at the forefront of the lobbying campaign for this legislation. So despite all the talk of promoting renewable and alternatives, it's nothing more than another congressional debacle to transfer wealth to favored interests.

Reading some of the provisions of the energy legislation will invoke flashbacks to the gas lines and energy shortages experienced in the 1970's. All of these energy policies -windfall profits taxes and industry regulations - have been tried and failed. They increased our reliance on foreign oil, created shortages and hurt consumers. Despite their best attempt to repackage provisions, the latest energy bill pedaled by Democrats in Congress will revisit the mistakes of the 1970's.

With $100+ oil and blatant threats by key energy producing nations - like Venezuela - Democrats in Congress have reasoned that increasing taxes on the oil industry will miraculously lessen the burden on consumers. While it may be trendy to pick on "big oil", the reality is that America as a whole benefits from our oil companies having the resources to invest in more production and in alternative forms of energy. Raising taxes on energy companies raises the cost of production, dampens investment, research and exploration, and ultimately leads to higher prices for consumers.

Though sound bytes from Capitol Hill continually profess support for "energy independence," the bill passed by the House last week does nothing to deliver additional energy for Americans. While we denounce our reliance on Hugo Chavez and Middle Eastern despots for our oil, how can we, in good conscience, refuse to tap the millions of barrels of oil right here in America?

Both houses of Congress want to show their constituents they are serious about energy. But at a time when our economy and our security are impacted by energy, sloppy energy policy designed to score political points in an election year will cause consumers demonstrable harm. Congress's latest energy bill will raise energy costs, make us more dependent on foreign oil and undermine our nation's energy security. Hugo Chavez is smiling.

Steve Forbes is editor-in-chief of Forbes Magazine.

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