Energy Taxes' Faustian Bargain

In states all over the country, environmentalists and the progressive movement are pushing forward proposals to raise taxes on oil, gas and coal companies. Specifically, they are pushing what's known as "severance taxes" - taxes assessed when those companies sever natural resources from the earth. But as I show in a new article for the San Francisco Chronicle [1], there's a big unintended consequence of these proposals if they aren't structured correctly: Namely, they can politically strengthen the fossil fuel industry.

Obviously, I'm all for taxing the energy industry and all for severance taxes. But I don't want to see those severance taxes strengthen an industry that already has an outsized amount of political power, and that has used that power to prevent all sorts of critical pollution and drilling regulations. That's why I wrote this article - to look at how many of these tax proposals could break apart the traditional progressive coalition.

I won't be redundant on how exactly these proposals would do that - you can read the article for that [1]. What's disturbing, though, is that this very important dynamic has gone almost completely unreported in states that are considering these taxes.

The last thing we need is tax policy politically strengthening an industry that has had way too much power for way too long. And fortunately, there are severance tax proposals that are structured properly and that can be emulated everywhere. Now, it's just a matter of replicating those.