We can save $78 billion by ending oil and gas subsidies

[one...two...tree 2,762]

As the debt showdown between President Obama and top House Republicans drags on, you've probably been hearing about the billions in tax subsidies we give to the oil and gas industry each year. And if you haven't been, you should be; eliminating those subsidies would be a great way to reduce spending without raising taxes or cutting services.

So what does all that money go toward? And aside from a broken climate and oil spills, what exactly does it buy?

Fossil-energy companies get tax exemptions, free access to drill on public land, special accounting rules to hide profits, protection from foreign competition through import tariffs and regulations ... and the list goes on. We give so many favors to oil and gas companies that it's hard to keep track. Luckily, the determined wonks at Taxpayers for Common Sense have done it for us. The charts below tease out the biggest oil and gas subsidies hidden in various laws and accounting rules for 2011-2015. With more than $55 billion in targeted benefits for the industry and nearly $23 billion in general business subsidies, it's nothing to sneeze at.

In the early 1900s, it might have made sense to give the young oil and gas industry a boost, but today it's one of the largest, most profitable industries in history, obviously no longer in need of handouts from Uncle Sam.

Some Republicans are saying, "Hey, these aren't really government spending, they are just tax deductions. Cutting them would be raising taxes, something we can't afford to do in a recession." This is where political and economic realities part ways. From an economic standpoint, there is no difference between giving someone a tax break of $100 and giving someone a check for $100. Either way, the treasury is out a hundred bucks.

In a recent article in National Affairs [PDF], economist Donald Marron calculates that about $600 billion in spending is hidden in the tax code, or nearly 20 percent of the federal budget. Marron writes, "Because tax cuts often sound more appealing to policymakers and voters than spending increases -- especially in today's political climate -- the temptation to spend through the tax code is enormous. And the confusion surrounding such spending allows politicians to claim they are saving taxpayers' money when, in fact, they are really spending it."

For the most part, these tax preferences are not simply "loopholes" or errors in the tax code. They are spending disguised as tax breaks. As the debate in Washington rages on about how to reduce spending, the billions in spending hidden in the tax code deserve the same close scrutiny as entitlements, defense, and domestic programs.

The oil industry and their political shills in Washington also argue that axing these subsidies would raise the cost of gasoline, but again, economic reality gives lie to their rhetoric. The cost of gas depends primarily on global oil supply and demand (more on gas prices here). While the U.S. sucks up 25 percent of global oil production, we have only 1.5 percent of proven reserves. No matter how much we "drill baby drill," or how much we stick it to the oil companies, we can't substantially affect the global supply and therefore price of oil. It is the rising demand in the developing world and the threats to production in unstable countries that determine how much we pay for gasoline here at home.

Subsidies to the gas and oil industry are completely unnecessary and do nothing to relieve pain at the pump, yet they cost American taxpayers billions. The companies don't need them and we can't afford them; it's time to end them.

http://www.grist.org/energy-policy/2011-07-29-we-can-save-78-billion-by-ending-oil-and-gas-subsidies

[Ban Hammer 13,554]

While the U.S. sucks up 25 percent of global oil production, we have only 1.5 percent of proven reserves. No matter how much we "drill baby drill," or how much we stick it to the oil companies, we can't substantially affect the global supply and therefore price of oil. It is the rising demand in the developing world and the threats to production in unstable countries that determine how much we pay for gasoline here at home.

and removing any incentives for oil companies will also help determine that price. sounds like a dream come true for bicycle manufacturers

[dalegg 143]

The oil industry and their political shills in Washington also argue that axing these subsidies would raise the cost of gasoline, but again, economic reality gives lie to their rhetoric. The cost of gas depends primarily on global oil supply and demand (more on gas prices here).

I don't believe they wouldn't raise gas prices.

Edited July 30, 2011 by dalegg

[lostinblue 1,989]

Tax bills for 5 corporate giants

2 of 5Exxon Mobil: $15.1 billionU.S. federal: -$156 million

U.S. state and local: $110 million

International: $15.2 billion

Exxon paid the most taxes last year of any U.S. company, by far -- but not a cent went to the IRS for income taxes. That's because the oil giant does business in some of the mostly highly taxed countries in the world. Want to extract petroleum in Nigeria? Be prepared to fork over up to 85% of your profit in tax payments.

Exxon doled out more than $15 billion in income tax payments to foreign countries last year. U.S. tax codes allow companies to take massive deductions in light of those international charges, which knocked Exxon's federal income-tax bill down into negative territory.

That said, Uncle Sam gets his money in other ways. Including sales taxes and duties, Exxon recorded $7.7 billion in U.S. tax costs last year, and paid even more overseas.

Its grand total in global taxes for the year? A whopping $78.6 billion. The company's effective income tax rate was a hefty 47%, its highest in three years.

NEXT: Chevron: $8 billion Chevron: $8 billionU.S. federal: -$19 million

U.S. state and local: $230 million

International: $7.8 billion

Some businesses save money on taxes by logging their biggest profits in low-tax countries. But like Exxon, Chevron has little choice about where it can extract oil. Thanks to the billions it sends overseas, Chevron faced an effective income tax rate of 43% last year.

It's perfectly reasonable, under the tax code, for a company with multinational operations to reduce its U.S. tax bill to $0, said Eric Toder, an institute fellow at the Tax Policy Center.

"In order to avoid having profits taxed in two locations, the host country gets the first bite of the profits," he said.

Think U.S. companies should be paying the U.S. government first? Take it up with lawmakers, not the oil companies.

"There are not as many loopholes in the corporate tax code as people think, and there are legitimate reasons for which these companies pay as much or as little as they do," said Scott Hodge, president of the Tax Foundation. "If anybody complains, they should not blame the companies, they should blame Congress -- they wrote the tax code.

http://money.cnn.com/galleries/2010/news/1004/gallery.top_5_tax_bills/2.html

[Obama 2012 1,714]

there Steven goes again, screwing up definitions of words.

Oil companies do not get subsidies....

[lostinblue 1,989]

John Hoffmeister gave the history of the anti-oil mentality in "Why We Hate Oil Companies". Anyone living in Texas when Carter's windfall profit tax went into effect knows that it devastated the energy-producing state' economies. The big companies pulled out of oil exploration and haven't returned, and thousands of small companies went bankrupt. Now Washington's greed again attacks the energy companies.

[Ban Hammer 13,554]

there Steven goes again, screwing up definitions of words.

Oil companies do not get subsidies....

yet not a peep about eic, a real subsidy.

[luckytxn 2,265]

So from what I understand oil companies do not get subsidies or special tax burden but ALL companies do. So why not the outrage for all the companies? Why single out just oil companies?

The real subsidies is anything dubbed 'green' as they get subsidies and tax breaks. Lets end all subsidies to them and see if they can make it on their own.

[Obama 2012 1,714]

So from what I understand oil companies do not get subsidies or special tax burden but ALL companies do. So why not the outrage for all the companies? Why single out just oil companies?

The real subsidies is anything dubbed 'green' as they get subsidies and tax breaks. Lets end all subsidies to them and see if they can make it on their own.

Yup. Just look at the tax credit given for buying that piece of ####### "Chevrolet Volt."

You don't need a tax credit to sell an iphone.......

[peejay 327]

So from what I understand oil companies do not get subsidies or special tax burden but ALL companies do. So why not the outrage for all the companies? Why single out just oil companies?

Because communists and socialists hate capitalism and believe private wealth should be seized and redistributed as they see fit.

[peejay 327]

Because communists and socialists hate capitalism and believe private wealth should be seized and redistributed as they see fit.

Forgot to add:

Oil companies are raking it in right now, so they are just the target of the moment. All eyes are on them and their huge profits. Where were the whiners when the price of oil and natural gas fell out back in the 1980's and 1990's that pushed many energy producers to the brink?

[Rebecca Jo 1,962]

Forgot to add:

Oil companies are raking it in right now, so they are just the target of the moment. All eyes are on them and their huge profits. Where were the whiners when the price of oil and natural gas fell out back in the 1980's and 1990's that pushed many energy producers to the brink?

Well, peejay, isn't that what capitalism is about? Only the strong survive? Except with the case of the oil companies, Uncle Sam stepped in. Funny, US capitalism.

The very companies who had their hands out in the 80's and 90's now hold the US middle class hostage. Not a very polite way to pay us back for holding them back from the brink with our tax dollars.

Edited July 30, 2011 by Rebecca Jo

[Rebecca Jo 1,962]

yet not a peep about eic, a real subsidy.

Enacted in 1975 under the Presidency of Gerald Ford, and vastly expanded in 1986 under the Presidency of the great Republican demi-god, Ronald Reagan.

[Obama 2012 1,714]

Well, peejay, isn't that what capitalism is about? Only the strong survive? Except with the case of the oil companies, Uncle Sam stepped in. Funny, US capitalism.

The very companies who had their hands out in the 80's and 90's now hold the US middle class hostage. Not a very polite way to pay us back for holding them back from the brink with our tax dollars.

You have got to be joking?

The only ones who hold the "Middle class hostage" are the 535 members of congress who decide to tax people or not.

Oil companies pay taxes, don't be fooled. Oil companies don't 'need' subsidies either. As a matter of fact, they don't get subsidies at all if you know what subsidies really are.

The left wing nutjobs though will try and make you think what they get is subsidies, when in reality it's another bastardization by the left wing of a definition.

[Rebecca Jo 1,962]

You have got to be joking?

The only ones who hold the "Middle class hostage" are the 535 members of congress who decide to tax people or not.

Oil companies pay taxes, don't be fooled. Oil companies don't 'need' subsidies either. As a matter of fact, they don't get subsidies at all if you know what subsidies really are.

The left wing nutjobs though will try and make you think what they get is subsidies, when in reality it's another bastardization by the left wing of a definition.

Come over here and let me whisper a little secret to you, Paul. The words "Congress" and "Tax" are not applicable to "people" alone. We even have the US Supreme Court telling us that companies are entitled to the same "privileges" entitled to "persons".

I don't need left wing nut-jobs, or you, to define an entitlement to me.