American taxpayers subsidize the giant oil companies to the tune of 4 billion dollars a year.
The American tax code contains a variety of provisions that make oil production one of the most heavily subsidized businesses in the country, with tax breaks available at virtually every stage of the exploration and extraction process.
According to the most recent study by the Congressional Budget Office, released in 2005, returns on capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.
For many of the smaller oil companies, the tax on capital investment returns is so low that it is more than eliminated by various deductions and credits. Incredible as it may seem, some companies’ returns on investment are higher after taxes than before.
In fact, oil profits are gushing. According to the organization Public Citizen, from the time George Bush became President in 2001 through the first quarter of 2007, the top five oil companies in the United States recorded profits of $464 billion. By 2011, those numbers were beginning to look like small change: in the second quarter of 2011 alone, the big five oil companies made 36 billion in profit.
That’s profit, not total revenues.
Meanwhile, you and I–together with other American taxpayers–continue to provide the industry with subsidies that have been estimated at between 4 and 8 billion dollars a year.
The various tax breaks enjoyed by big oil probably made sense when the industry was in its infancy. They make no sense at all when the industry is not just profitable, but obscenely so. Nevertheless, a move to eliminate those subsidies failed yesterday in the Senate, despite strong support from President Obama. While the proposal received support from a majority of the Senate, it failed to garner the filibuster-proof 60 votes that are required in order to get anything done in this era of Republican intransigence.
I suppose there is something admirable in the GOP’s loyalty to the 1%–those George W. Bush once called “his base.” They refuse to tax the rich (and by “tax,” I mean raising the top marginal tax rate by 3% to the still historically low levels of the Clinton administration). They refuse to eliminate or reduce subsidies for obscenely profitable oil companies–indeed, Paul Ryan’s budget proposal would visit a world of hurt on people who depend on Medicaid, Medicare or other social programs, but it reportedly increases subsidies to big oil.
So much for the GOP’s purported concern about deficits.
From a fiscal policy perspective, these positions are simply unfathomable. And it is really difficult to believe they are politically palatable. Maybe the theory is that if they raise enough of a fuss about transvaginal probes and contraception, no one will notice.