Representative Katie Porter (D., Calif.) was indignant, her tweet went viral, and she is getting rapturous coverage. She was also wrong.
At a hearing yesterday, Strata Production Company president Mark Murphy said that she had a “misconception . . . that somehow the oil and gas industry have benefits from some special sort of tax structure.” Porter hit back:
You do benefit from special rules. There’s a special tax rule for intangible drilling costs that does not apply to other kinds of expenses that businesses have. You get to deduct 70% of your costs immediately, and other businesses have to amortize their expenses over their entire profit stream. So please don’t patronize me by telling me that the oil and gas industry doesn’t have any special tax provisions. Because if you would like that to be the rule, I would be happy to have Congress deliver.
As my AEI colleague Kyle Pomerleau pointed out, though, many business costs can be deducted immediately: 100 percent, not just 70 percent. A manufacturer who puts a machine into service can deduct the cost faster than oil and gas companies can deduct their intangible costs.
There’s a good case that 100 percent expensing is the way to go for all business investments. The problem isn’t that oil and gas companies’ investments are taxed more lightly than every other business’s investments — they aren’t. It’s that all business investment is taxed too heavily.