Oil industry taxes 'could make US deficit worse'

President Barack Obama's plans to raise taxes on the gas and oil industry has the potential to damage the economy rather than aid its recovery, it has been claimed.

The research, by Louisiana State University economist Joseph Mason, suggests that the plans for a domestic manufacturing deduction as well as a provision that can help oil companies reduce their domestic tax when they pay out to foreign oil producing countries will cost more than they will garner.

Mr Mason has called the plans short-sighted and warned that they will make the US's fiscal situation worse in the long-term, rather than better.

He explains that while the changes are likely to raise $30 billion (£18.9 billion), it will cost $341 billion in economic output, $68 billion in wages and $83.5 billion in reduced tax revenues.

"The net fiscal effect - a loss of $53.5 billion in tax revenues - suggests that the policy proposals exacerbate, rather than alleviate, the federal deficit," the report stated.

President Obama recently warned that the US will default by August 2nd if Congress does not raise the $14.3 trillion debt limit.