Administration Demonizes Energy Producers
I want to go back to this infographic the White House released along with their energy progress report earlier this week. There’s an glib mention that “oil companies are receiving about $7,610 a minute in tax breaks. That’s $4 billion a year.”
This was echoed last week in North Carolina, when the President told an audience, “Right now, $4 billion of your tax dollars goes straight to the oil industry every year.” He went on to say, “The American people have subsidized the oil industry long enough -- they don’t need the subsidies. It’s time to end that taxpayer giveaway to an industry that's never been more profitable.”
That means he wants to raise taxes on energy producers which would cost jobs and reduce federal revenues.
All good stories need a villain, and the administration is making oil and gas companies the bad guys in the gas prices story. Today, the Wall Street Journal editorial page takes on this demonizing by pointing out that The Tax Foundation found “that between 1981 and 2008, oil and gas companies sent more dollars to Washington and the state capitols than they earned in profits for shareholders.”
How dare they!
The editorial goes on to compare the tax rates of the oil and gas industry with other industries:
Crunching Compustat North America numbers, API [American Petroleum Institute] estimates that the average effective tax rate for oil and gas companies is 41.1% for 2010—i.e., taxes as a share of net income. That is broadly in line with the Energy Information Administration's estimates for "major energy producers." By the same measure, other manufacturers on the S&P Industrial index pay an effective rate of 26.5%.
Paying a higher percentage in taxes? For shame!
[By the way, if oil and gas companies aren’t paying their “fair share” (whatever that means) then what does that say about other manufacturers? I’m not hearing any calls in speeches to raise their taxes (which wouldn’t be a good idea).]
Now, about the White House’s “$7,610 a minute” canard, Stephen Comstock at Energy Tomorrow lays out what oil and gas companies pay into the federal government:
The oil and gas industry pays substantial amounts to the federal government in rents, royalties, bonus payments and, oh yes, taxes. In total, these payments have been around $86M/day or $59,000 a minute! An over 700% return on their “investment”. So, at the end of the day, it is not the government supporting the industry, but the industry supporting the government.
Looking for villains and pitting “us versus them” doesn’t make us more energy secure even if it makes for base-rallying campaign rhetoric. For a solution to unleashing the job-creating potential of American energy check out the Chamber’s five steps.