2018 OFFICIAL PUBLICATION OF THE MONTANA PETROLEUM ASSOCIATION
Tax Cuts – Results TRUMP Politics
Love him or hate him, Donald
Trump is presiding over one of the
GDP is up, unemployment
overseas businesses are coming
home to repatriate tax dollars in
the United States. Countless others
have announced plans to increase
job numbers and wages.
ough the Tax Cuts and Jobs Act
has received criticism, a report released by the Joint Committee on
Taxation in December 2017 explains that 77 percent of total tax cuts
will go to individuals. at’s $1.1 trillion in tax savings to average
In fact, a whopping 94 percent of taxpayers will bene t from an
increase in the standard deduction, which was doubled by the new
Act. at means that until 2026 when deductions are currently slated
to revert to pre-reform levels, a single ler’s deduction will increase
from $6,350 to $12,000, while the deduction for Married and Joint
Filers will go from $12,700 to $24,000.
Increases in the standard deduction are met with changes to other
deductions. While some will go away come tax time 2019, taxpayers
will have other perks to look forward to, including the increased child
tax credit, the elimination of the ACA individual mandate, and higher
deductions for medical expenses.
Corporate tax rates in the United States are among the highest in
the world, with rates on U.S. energy rms at 37 percent – the highest
of any industry. e Act reduced the maximum corporate tax rate to
the lowest rate since 1939, from 35 percent to 21 percent. Claims that
the Act disproportionately favors corporations are misplaced. Reductions
in corporate tax rates are o set by $695 billion dollars’ worth of
corporate loophole closers.
“Big business” is hardly the only sector of the economy poised to
bene t from tax cuts. Until 2025, the standard deduction for passthrough
businesses, including limited liability companies, sole proprietors,
partnerships, and S corporations, will increase to 20 percent,
though deductions for service professionals will be phased out once
individual income reaches $157,500 for singles and $315,000 for joint
lers – well beyond a “living wage”.
In lowering tax rates, the U.S. will attract new business, make
America competitive again, and provide business owners with more
money to direct towards operations such as upgrades and wages.
With oil price over $60 dollars a barrel, the highest since 2014,
things are looking promising for American oil from American soil.
Preserved in the tax reform package were two of the most important
tax provisions for petroleum producers of all sizes – intangible
drilling costs and percentage depletion.
Intangible Drilling Costs, or IDCs, were rst approved by Congress
in 1913. IDCs are not a tax credit, a public expenditure, or government
spending outlay. ey represent an accelerated deduction that
applies to 60-80 percent of the costs an operator incurs on the development
a well. ose costs include surveying, site preparation,
repairs, and labor costs; everything put into the ground, and not relating
to bene ts reaped from the ground.
e ability of operators to either expense or capitalize IDCs makes
formation capital available for new exploration and production.
Drilling is always a gamble, even with the best available information
from geologists and geophysicists. e treatment of IDCs incentivizes
continued investments in an otherwise risky business.
Another vital tax incentive which remains in place is Percentage
In 1926, Congress passed an accounting standard to spur investment
in the robust development of American natural resources. Prior
to this, the only deduction for mineral resources was cost depletion,
which did not provide su cient opportunity for smaller, independent
businesses to retain revenues to keep up with well costs.
By Jessica Sena, Communications Consultant, MPA Spokeswoman
most exciting economic upticks
Americans have ever seen.
is down, and thanks to a Reagan
sized tax reform package,