Obama Proposes Cutting Oil and Gas Subsidies $41 Billion to Help Fund Jobs Package

Just when it seemed like the debate about repealing oil and gas subsidies had faded away, President Obama gave the issue new life. Speaking at the White House yesterday, Obama proposed cutting certain tax credits to profitable oil and gas companies to pay for part of his $467 billion job-creation package.

“The bottom line is, when it comes to strengthening the economy and balancing our books, we’ve got to decide what our priorities are,” he said, speaking in the White House Rose Garden. “Do we keep tax loopholes for oil companies, or do we put teachers back to work?”

The president seems to have support from the American public. In a Washington Post/ABC News poll conducted this July, 59% of Americans said they supported repealing permanent tax breaks for fossil fuel companies to reduce the deficit. While the funds would be used for a jobs plan rather than deficit reduction, the President and Democratic members of Congress are hoping to ride that support.

In an interview with Climate Progress last month, Senate Majority Leader Harry Reid said he was bullish on the oil and gas subsidy issue. Even while expressing doubts about getting support for extending clean energy incentives, Reid said he believed it is possible to roll back certain permanent tax credits in the fossil energy sector:

“That is one thing that I think we have a shot at doing,” Reid told Climate Progress. “And I hope we can do that — it will help us get a few more dollars for other areas. I wish we could shift it directly into renewable energy programs. But unless something breaks in the next couple of months, I don’t see that happening.”

Obama announced his jobs plan last week before a joint session of Congress. While choosing not to explicitly talk about green jobs and clean energy, the plan does include efficiency upgrades to schools, a variety of transportation infrastructure upgrades, a strategy to rehabilitate foreclosed homes and make them more efficient, and a strong approach to environmental standards (even though the White House dropped a proposed smog rule just days before the speech.)

Repealing tax subsisides for oil and gas companies would bring in about $41 billion over the next decade. Most of the other funds would come from changing the number of itemized deductions individuals making over $200,000 and families making over $250,000 respectively can report on their tax returns.

The coming debate around oil and gas subsidies may be fierce. But Senator Reid said he believes the tide is turning in favor of a plan to repeal them.

“It’s quite embarrassing for anyone to support these tax breaks while these companies are earning record profits. If we can find a good use for the funds beyond lining the pockets of oil companies, I think people will support that,” said Reid.

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8 Responses to Obama Proposes Cutting Oil and Gas Subsidies $41 Billion to Help Fund Jobs Package

  1. Jay Alt says:

    Rep Markey tells it like it is-
    Big Five Oil Company Profits for the Decade – $1 Trillion.

    WASHINGTON (2.03.11) – Nearly $1 trillion – that’s the total profit earned by the top five multi-national oil companies over the first decade of the new millennium. $36.5 billion – that’s the total in tax subsidies the American public will provide to the oil industry over the next decade. $53 billion – that’s the value that oil companies could receive from not paying royalties on some Gulf of Mexico production over the next 25 years. And 1916 – the oldest tax subsidy the oil companies still utilize.

  2. Here’s another way to raise $4 billion a year for jobs: levy a carbon pollution penalty on America’s exported coal.

    If we levied the BC carbon tax rate on USA coal exports it would raise $4 billion a year. That would fund a lot of jobs.

    It would also start to put some break on the runaway coal export boom that is starting to happen in USA.

    According to EIA, USA coal exports have surged 64% in the last four years. From 50 million tons in 2006 to 82 million tons in 2010. At the same time the price that exported coal has sold for has increased from $70 to $120 a ton.

    When are we going make fossil fuel companies pay for their climate damages?

  3. Mike Roddy says:

    Good idea, Barry, but Congress won’t pass a carbon tax on coal or anything else. Repubs control the House, and Rockefeller, Nelson etc vote coal every time.

  4. Mike Roddy says:

    By proposing to eliminate oil company subsidies, Obama will be able to force the Republicans to admit that they work for the oil companies. A larger issue is whether the public cares, especially since Obama appears to work for them, too.

    Analysts tend to be economists and not businessmen, and pay too much attention to short term pricing and taxes. Smart businessmen- and we have to give Exxon and Koch credit for that- are all about market share. That includes busting out renewables and EV’s by enabling pipelines, and obeying companies such as Southern and Peabody (read: Confederates reincarnated). Removing their subsidies won’t change that market share or renewable mix significantly.

    It’s far more important to fight for EPA regs, including reducing air pollution and even CO2 emissions. Our pathetic leadership ducks both, but events may force this issue to the fore prior to the next election. Waiting until, say, 2016 will be too late. We have to act now, and I don’t mean campaigning for Democrats.

  5. Similar situation to the $4b a year in oil company tax increase. The same strategy could be used where Obama tells the American people that they could have $40b over ten years to spend on USA jobs, jobs, jobs if congress just puts a carbon pollution tax on our coal exports. Let the GOP say “no, it is more important that coal companies should get to pollute for free than it is to put Americans to work.”

  6. David says:

    Actually, the GOP would say, “We’ve got an industry that is exporting a product to other countries, and these exports have been growing. This employs Americans and reduces our trade deficit. The president wants to put a tax on those exports, making them more expensive, which will cause these countries to stop buying the product, which will put Americans out of work, and increase our trade deficit.”

  7. John Howley says:

    The first thing I don’t understand is why we need to subsidize renewable energy so it can compete against subsidized oil and coal. Would it make more sense to eliminate the subsidies for oil and coal?

    The second thing I don’t understand is how Republicans can support using tax dollars to subsidize private oil and coal companies. It goes against the small government, lower my taxes rhetoric. More important, subsidies are contrary to the teachings of Milton Friedman and other conservative and libertarian economists who teach that accurate price signals (i.e., prices that reflect true costs without subsidies) are essential to the functioning of a free market.

  8. James says:

    most of these kinds of subs are also given to other companies as well. reform the tax code that taxes everyone and it helps spread the cost and then everyone is interested in what goes on about tax rates.