The US is a low-tax country. We were founded because of a tax-rebellion, and tax protests ripple through our nation from time to time. The latest round of corporate tax reform was in part a reaction to high corporate tax rates – and they were high, compared with the rest of the world. That’s why so many US corporations had been changing their official domicile to an overseas location. US companies like Medtronic (Minneapolis) or Slumberger (Houston) or Carnival Cruise Lines (Miami) are actually incorporated in Ireland or the UK.
But there’s one area where the US stands out as an exceptionally low-tax country, and that’s energy taxes. Whether it’s excise taxes or carbon taxes or use fees, the US has some of the lowest energy taxes in the world.
Source: OECD, Taxing Energy Use 2018
Switzerland, Luxemburg, and the UK have the highest taxes; Canada, the US, Indonesia, and Russia are the lowest, as measured by taxes per ton of carbon dioxide. It’s also notable that taxes on oil products make up the vast majority of these taxes. With more and more electric cars due to hit the roads over the next decade – especially in Europe – taxes on coal and natural gas will have to increase, if only to provide funds for road repair.
Still, it’s striking how much of an outlier the US is. Maybe the large, rural nature of our landscape make energy taxes impractical, and maybe our politics make them unlikely. But in a world of tax reform, budget deficits, and continued focus on carbon emissions, the likely vector for energy taxes in the US would seem to be higher, not lower.
Douglas R. Tengdin, CFA