Speaking of Gushers….

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.


  1. I will endorse a movement to remove government tax breaks to companies that produce jobs as well as oil, if the government will agree to reduce their take of the profits through gasoline taxes. The simple truth is that the federal government rakes in more profit from “big oil” than “big oil” does.

    Oil companies average profit margins are about 6-6.5%, far less than most other major industry profit margins. Oil companies make an average of 7 cents per gallon of gasoline sold. You know how much the government makes? 48 cents per gallon! Who is taking advantage of who?

  2. jedna… you do realize that the majority of taxes collected on gas come from the states. i don’t think the government has adjusted the tax rate since the 90s. that’s why there’s always a problem funding highway repairs.

    the problem in this truly isn’t federal taxes. the federal gas tax is 18.4 cents per gallon. comparatively the IN tax is a 7% sales tax. so if gas is $4.15 per gallon the state tax is about $0.26/gallon. subtract all the taxes off and gas is still ridiculous at $3.71/gallon. seems not that long ago I was putting in gas at $0.98/gallon. :-/

  3. McDaniel, so what is the solution to lower gas prices? Restrict permits to explore and drill? Restrict the ability to manufacture new refineries because of draconian environmental rules? Mandate 50 different types of fuel blends for different seasons and states? Devalue the dollar by unimaginable debt? Gas prices are going exactly where Obama wants them to. His own
    Secretary of Energy stated he wanted our prices to be similar to Europe’s and Obama stated that under his plan our nation’s energy costs would “necessarily skyrocket”. Liberals won’t allow the building of nuclear plants, decry the evils of coal and oil, and protect snails over the economic improvement through cheaper energy costs. Liberals created the problem of high energy costs and then claim they are the answer…it borders on insanity. How about we trade in our cars for bicycles, close all the factories, sell all our electronics and start farming by hand again.

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