Big Oil: Should it continue to get tax breaks?

It’s a gusher! said Robert Reich in the San Francisco Chronicle. With Americans struggling to pay $4 a gallon for gas at the pump, Big Oil is currently raking in record profits. In just the first quarter alone, the five biggest oil companies collectively hauled in $35 billion in profits. Those obscene numbers were just a tad embarrassing for the industry last week, as their CEOs were called on the carpet by a Senate committee now weighing a proposal to end the $4 billion in annual tax subsidies to the oil industry. Not surprisingly, the CEOs said it would be “un-American” to stop giving them tax incentives for exploration, and warned it would lead to even higher prices and lost jobs.

“How absurd are these claims?” asked The New York Times in an editorial. Tax breaks don’t provide the incentive to drill new wells; huge potential profits do. And ending the subsidies, said nonpartisan analysts, would barely affect oil-company profits or increase gas prices. That’s because “bigger forces are at work than the U.S. tax code,” said The Baltimore Sun. Oil is a globally traded commodity, and America’s production is a drop in the bucket. That’s why opening more offshore waters in California and on the East Coast to drilling, as Republicans insist we must, will have a negligible effect on oil prices in the future, and none today. But at a time of austerity, let the “sacrifice be shared”: Big Oil should gladly chip in a modest $4 billion to reducing the deficit.

Wow—how courageous, said David Harsanyi in National Review. Democrats think we’ll be distracted from “out-of-control federal spending” if they beat up the oil companies. The same oil companies, not incidentally, already pay an effective tax rate of 48.4 percent—nearly twice the rate of other industries. Furthermore, millions of Americans work in the oil industry or depend on it for their livelihoods, so it’s good that at least one industry is thriving. If Congress wants to get serious about deficit reduction, said USA Today, it should target all tax loopholes—not just the oil industry’s. The 70,000-page tax code is rife with tax breaks doled out to favored industries, in return for political contributions. When Congress eliminates most or all of them, we’ll believe it’s finally getting serious about reducing the deficit, instead of offering us a “one-act piece of political theater.”

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