We tend to hear a lot of nonsense from the right about how raising taxes will supposedly prevent things from happening. When it comes to energy development, for instance, we're told that raising taxes on oil and gas companies will slow down or stop their exploration and development, thus hurting their industry. Except, a new study from Headwaters Economics shows that's just not true:
States can increase effective tax rates and realize higher revenue from energy development with little risk of affecting the local energy economy. The oil, natural gas, and coal industries are guided chiefly by the location of reserves, and are less able to relocate than are industries with mobile capital resources (such as textile mills or auto-makers)...
We also find no evidence to suggest that the dramatically different effective tax rates in the Intermountain West we have led to more or less investment from state to state. Montana reduced its tax rates and extended incentives to the oil and natural gas industries in the late 1990s. At the same time, Wyoming studied the issue, finding that new incentives were unlikely to stimulate new exploration and drilling, and chose not to alter its tax structure.
The results of these choices are clear: Wyoming has captured proportionately higher benefits than Montana from the current surge in energy production value, and there is no evidence that Montana's tax breaks worked-Montana has stimulated less, not more, energy development than Wyoming and left more than half a billion in revenue on the table.
The first point in this excerpt is about what I've called captive-industry populism - lawmakers have far more regulatory leverage over industries that are geographically captive than those that can simply move away. The second point is about taxes in general - it destroys the right's entire argument that when you raise taxes on something, it automatically creates a market-altering disincentive to do that thing.
So the next time you hear a conservative say that if we raise taxes on X, that means companies won't produce X anymore or won't hire people to produce X anymore, you know that's not necessarily an ironclad axiom. It may be true, it may not be true - but the idea that it is automatically and always true is just not grounded in fact. Not even close.
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We tend to hear a lot of nonsense from the right about how raising taxes will supposedly prevent things from happening. When it comes to energy development, for instance, we're told that raising taxes on oil and gas companies will slow down or stop their exploration and development, thus hurting their industry. Except, 
