Ending Oil Company Tax Breaks a ‘Money Grab’ by Democrats, Says Chamber of Commerce
(CNSNews.com) – Plans by congressional Democrats to repeal tax deductions used by oil companies are a “clear attempt” to target oil producers that amounts to a “money grab,” said Chamber of Commerce Senior Vice President and Chief Economist Martin Regalia.
“These suggested tax changes were aimed at a very select few [energy] companies in a single industry and they were sold as a good change in the [tax] code,” Regalia said at the National Press Club in Washington on Monday.
“In fact, what they are is a clear attempt to go after companies that in the current environment have higher profits and, therefore, look like viable targets to raise more money for the federal government,” he said. “This is just pure and simple a plain and ordinary money grab.”
At issue is a plan from Senate Democrats to remove tax write-offs used by oil producers so that the increased tax revenues to the government can be applied to deficit reduction. Under the Democrats’ plan, according to news reports, only the five largest oil producers in the United States would see their taxes raised, prompting Regalia to call the plan a “money grab.”
“It’s not even a thinly-veiled money grab,” Regalia said. “They [Democrats] went after the five oil companies who recorded profits and have shown higher profits in the current environment.”
“We shouldn’t be using the tax code as the carrot and the stick,” he said.
The top five oil and gas corporations operating in the United States are ExxonMobil, Chevron, ConocoPhillips, Royal Dutch Shell, and BP America. The Democrats’ plan would end about $21 billion in tax breaks for those firms.
Senators Harry Reid (D-Nev.) and Robert Menendez (D-N.J.) said in a May 4 letter that the five largest oil companies should “share in the sacrifice” now that they are making large profits.
“Now that the five biggest oil companies have become some of the most profitable companies in the world, taxpayers shouldering $4 a gallon gas prices should not have to foot the bill for tens of billions of outdated, unnecessary subsidies that go straight into the pockets of oil industry executives particularly in light of our increasing deficit,” reads the letter.
“Just as we ask families to do their part to help reduce the deficit, Big Oil companies need to step up to the plate and share in the sacrifice,” it states.
Brian Johnson, senior tax advisor for the American Petroleum Institute – the oil and gas industry’s trade organization – said that his industry would welcome the “fair share” debate any time, noting that the oil and gas industry pays more in taxes than any other industry.
“We’d welcome that comparison any day,” Johnson said at the National Press Club. “Our companies have an average 41 percent effective U.S. tax rate – that’s higher than almost any other company. We pay almost $90 million in taxes and other payments every single day to the federal government, that’s about $37 billion a year. So this idea of paying their fair share and looking at all industries in the context of tax reform, which I think Speaker [John] Boehner (R-Ohio) was saying, is, sure, I think that’s a legitimate question to ask.”
Reid and Menendez said that the reason for going after oil company profits was as a response to high gas prices.
“To a family struggling to pay rising gas prices, this is not a partisan or political issue – this is an economic issue. In the nature of bipartisanship, let’s work together to put the needs of middle-class families over the whims of the most profitable industry in the world.”
However, the API’s Johnson said that making oil companies, even large ones, pay higher taxes won’t affect gas prices on bit.
“We’ve seen this in the past from both sides. They were bad ideas then and they’re bad ideas now,” Johnson said. “When price is set on a global supply-and-demand market restricting or limiting [tax] deductions in the U.S. that decrease supply, is not going to send a signal to the markets to decrease gas prices.”
According to the Federal Highway Administration, the government (federal and state) takes an average of 48 cents on every gallon of gasoline sold in the United States.
For ExxonMobil, in the first quarter of 2011, it generated $2.6 billion in earnings in the United States but it also paid $3.1 billion in government taxes, according to its public revenue filings. Between 2005 and 2009, ExxonMobil paid $63 billion in U.S. taxes. Its worldwide taxes in 2009 totaled $81 billion.
Furthermore, according to the American Petroleum Institute, U.S. oil companies paid nearly $150 billion in income taxes to the federal government between 2004 and 2008. The API also reports on its Web site that the oil and gas industry in America supports 9.2 million jobs throughout the economy and contributes 7 percent of total GDP.