portion of the foreign levy that the taxpayer would pay if it were not a dual capacity taxpayer.3
proper prices on the consumption of goods that cause pollution.6
3. If these tax proposals are really about pollution, this is not a good approach to reducing greenhouse gas emissions.
4. The new fuel economy standards of the Administration are expected to eliminate the consumption of 1.8 billion barrels of oil between 2012 and 2030. In assessing the realism of reaching the policy objectives of the Obama Administration through raising taxes on oil and gas, the impartial Joint Committee on Taxation observes the following: 1. These tax changes will increase the after-tax costs of oil and gas, reduce the amount of capital invested in oil and gas and potentially increase the price of oil and gas.4 2. Decreases in the U.S. production of oil targeted by tax increases will increase oil imports but will probably have little impact on the global price of oil.5
If fossil fuel prices were to rise as the result of the repeal of incentives for fossil fuel production, there could be substitution from fossil fuels and into other energy sources, including nuclear or renewable sources of energy. The impact on pollution of any such substitution is unclear and would depend on the type and quantity of pollution associated with the alternative energy resource. To the extent that addressing pollution concerns was a major objective, economic theory would suggest the need for a tax on the externality from the consumption of fossil fuels that equaled the social harm from the consumption. Simply removing selected subsidies related to the production of fossil fuels does not address the issue of establishing
4. The national security implications of the Administration’s targeted tax provisions are not clear. If the proposals caused substitution into alternative resources of energy, reliance on foreign sources of fossil fuels could be reduced because nuclear and renewable energy sources are domestically produced. Alternatively, to the extent that the proposals primarily affect domestic production of fossil fuels, it is possible that any substitution into these alternate energy sources reflects a substitution from domestic production of fossil fuels into domestic production of these alternate sources, thus leaving the United States’ reliance on foreign fossil fuels unchanged. Furthermore, as the proposals are likely to have no effect on the world price of fossil fuels, any increase in prices for domesti-
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