Energy Policy: The higher gasoline prices go, the more the president carps about oil industry "subsidies." But it's a diversionary tactic. He knows that eliminating tax breaks would do nothing to ease the pain at the pump.
Late last month, as the Senate was getting ready to vote a bill to repeal tax deductions for oil companies, President Obama complained that "Congress thinks it's a good idea to send billions more of your tax dollars to the oil industry."
"I think it is time," he said, that Big Oil "got by without more help from taxpayers. The . . . industry is doing just fine."
That bill was rejected. But if the president doesn't like current policy, he's free to lead the drive for change, which he's done the last three years by submitting budgets that would eliminate what he calls "subsidies" for the oil industry.
But he shouldn't be able to get away with distorting the facts to further a political agenda.
First, no one sends tax dollars to the oil industry. Yes, the industry gets tax breaks? But they're the same write-offs used to offset the costs of doing business that Washington has made available to every industry.
There's no transfer of money from taxpayers to industry. No corporate welfare. The policies that Obama maligns as subsidies simply allow businesses to keep more of their own money.
The same policies also force oil companies to pay the federal government $90 million a day in taxes. No other industry in this nation pays as much. In fact, oil and gas companies paid more in taxes to the federal and state governments between 1981 and 2008 than they earned in profits for shareholders, according to Tax Foundation estimates.
"After adjusting for inflation, the combined net earnings (net of taxes and expenses) for the largest petroleum companies between 1981 and 2008 totaled $1.4 trillion," says a 2010 foundation report.
"By contrast, the total amount of taxes collected by U.S. governments from the oil companies topped $1.95 trillion, roughly 40% more than the industry's combined profits."
Despite Obama's clear implication, there are no subsidies or tax breaks carved out specifically for Big Oil. It gets no direct government spending and no loan guarantees. Those are reserved for politically correct, politically connected green energy companies, the Solyndras that go out of business, fail to produce a single kilowatt of energy, or both.
What Obama is agitating for are policies that discriminate against big oil companies. He wants to treat them differently, to punish them for no other reason than they've become a favorite villain of the political left that's socked with new taxes after being stripped of write-offs every other industry would still get.
He's a bit late to the party, though. Policies that discriminate against Big Oil are already on the books. For instance, every taxpayer that qualifies is eligible for a tax deduction of 9% on income derived from manufacturing, producing, growing or extracting in the U.S. -- every industry, that is, except oil and gas, where the deduction is 6%.
There's also the intangible drilling-costs deduction -- the industry's version of the research-and-development deduction that every other American company can take advantage of. Under this policy, companies that explore for and produce oil can deduct 100% of drilling costs associated with exploration operations.
But integrated companies -- those "Big Oil" companies that explore, produce, refine and distribute and are lumped under pejorative "Big Oil" -- are able to deduct only 70%.
If Obama has his way, the oil industry will have a bigger tax bill and smaller profits. He believes that somehow those conditions would lead to lower retail gasoline prices. They would not. In fact, they might cause prices to increase.
That's what Sterling Burnett, an energy and environment analyst at the National Center for Policy Analysis, believes. And it's a defendable position. Higher taxes would likely squeeze U.S. production, leaving less oil on the world market and pushing prices upward.
But don't expect Obama to back off of his position in deference to the truth. Higher prices are the covert policy of this administration.
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