Listen to any liberal or democrat. Read any paper. Watch any news broadcast or talking heads opinion show. The story is remarkably similar. Big Oil is raping the American taxpayer, enjoying record profits while receiving billions of dollars in taxpayer subsidies, all resulting from a massive lobbying campaign.
The only problem with this narrative is that none of it is true.
First, start with the definition of "subsidy." In economic terms it is "A payment from government to individuals or businesses without any expectations of production."
That definitely describes the solar, wind, electric car, and ethanol industries. But it's a far cry from oil and natural gas production. There, we are talking about the tax code, not government handouts. Here are the tax treatments targeted by democrats.
Domestic manufacturing tax deduction -- $1.7 B. This is a tax deduction given to every manufacturer in the US. Per CNN, it was "designed to keep factories in the United States." If that deduction were eliminated for oil companies only, it would mean singling out oil companies from all other manufacturers.The above address taxes that are not collected from the oil companies. What about actual tax payments?
Percentage depletion allowance -- $1 B. Any industry can write down a portion of the cost of its capital equipment as part of the cost of doing business. Right now, oil in the ground is treated as capital equipment. Again, this "subsidy" amounts to how the cost of doing business is defined. All companies get it, not just oil companies.
Foreign tax credit -- $850 million. Companies get credit for taxes they pay to other countries. All companies get this "subsidy," not just oil companies. Should a company pay tax on tax? Should only oil companies pay tax on tax?
Intangible drilling costs -- $780 million. According to CNN, "[a]ll industries get to write off the costs of doing business, but they must take it over the life of an investment. The oil industry gets to take the drilling credit in the first year." Among these four tax "breaks," this smallest one was the only one that treated oil companies differently.
Exxon recently released its first quarter results for 2011. The number grabbing the headlines was Exxon's profit: $10.65 billion in a single quarter. The number not given quite as much exposure was the taxes it paid in that same quarter: $8 billion, or 42% of income before taxes.But there is at least one member of the Big Oil club that gets subsidies from the U.S. government. Any idea which one?
And what does Exxon do with all that money it has left after paying $8 B in taxes? It put $7.8 billion into capital and exploration, as part of its plans "to invest between $33 billion and $37 billion per year over the next five years to develop new energy supplies."
In any other industry, that would be called "research and development." Exxon is plowing 73% of its after-tax profits back into R&D. Who would be better at spending $4 billion of energy companies' earnings in an attempt to provide our energy in the future: the energy companies or Obama's energy czar?
It's Petrobras, the state-owned Brazilian oil company.
The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met ... with Brazilian officials to talk about the loan.A few more tidbits:
- The amount of earnings not collected in taxes is about $4.3 billion per year -- about 0.2% of this year's deficit and enough to fund about 10 hours of current US government spending.
- A full $3.55 billion of that amount (82%) is due to the way taxes are treated for all industries or manufacturers. To change these tax laws only for oil companies would require singling them out among all industries for special mistreatment.
- The only tax in which the oil industry seems to get special treatment compared to other industries is intangible drilling costs. The amount of that subsidy? That would be $0.78 billion per year -- enough to fund less than two hours of federal spending in 2011, and not even half the amount we are lending a foreign-owned and state-owned oil company for drilling offshore Brazil.
- Oil companies already pay tax rates of 40-50% of income.
... the Oil & Gas industry ranked only 19th in the amount of money contributed to politicians in the 2008 election cycle: $17.7 million. Who was number one? Lawyers, who contributed $126.9 million, or over seven times as much as the Oil & Gas industry. The Education lobby gave $37.4 million, more than twice as much as Oil & Gas.Of course, lawyers and teachers unions are obama allies, so the lapdog media would never report that fact.
One final point, again unreported - nay, buried - by obama's lackeys in the MSM:
According to the DOE's Energy Information Administration, every time you fill up your gas tank, more of your money goes to taxes than goes to refining costs and profits combined.Facts are such inconvenient things when you're trying to spin a story...