Earlier today, I pointed to a Stateline report about state government struggling to cut wasteful tax subsidies for corporations, even when they are faced with billions in budget shortfalls. And the federal government has a similar problem with promulgating tax credits that go to either mature industries that don’t need the help or wind up benefiting parties other than those intended.

For instance, paper companies will receive $6.6 billion this year in credits meant to discourage use of fossil fuels. But to qualify for this boondoggle, these companies will actually add diesel fuel to a fuel mix that is already carbon-free, “following the letter of the law while violating its spirit.”

In that vein, BP, the oil company responsible for the ongoing gusher in the Gulf of Mexico, is slated to be one of the largest beneficiaries of tax credits meant to encourage ethanol use:

BP could stand to reap federal tax credits approaching $600 million this year for blending gasoline with corn-based ethanol, making the British oil and gas giant one of the largest beneficiaries of the 45 cents-per-gallon ethanol incentive…A common misconception is that it’s the ethanol producer receiving the direct benefit, when it’s really the oil companies. “That’s the guy behind the curtain,” said one energy lobbyist. He said BP might be the largest ethanol credit beneficiary by virtue of a heavy Midwest presence, and noted BP was among the first companies to support the ethanol mandate.

BP is the fourth-largest U.S. ethanol blender, behind Valero Energy, ConocoPhillips and Exxon Mobil, and it’s worth asking whether the movement toward a green economy is at all aided by sending free money to oil companies for mixing some ethanol into their blend. “Is it actually promoting the environment’s health? Is the subsidy making a difference, and for whom?” asked Rep. Earl Blumenauer (D-OR).

Indeed, these tax credits for the oil industry, which reaps record profits year after year, should be very closely examined, particularly since many of them contribute to the country’s reliance on oil by making it artificially cheaper to look for and extract. There are currently nine different federal subsidies given to the oil industry, and taxpayers would save $45 billion if they were all cut. But, as CAP’s Sima Gandhi pointed out, making such cuts would require Congress “to overcome lobbyist arguments that killing subsidies will harm the economy”:

Profitable and powerful oil companies, such as BP and ExxonMobil, pay lobbyists millions of dollars to scare lawmakers into believing that ending subsidies to oil companies will wreak havoc on the American economy. These arguments are advanced by trade organizations such as the American Petroleum Institute, and they suggest that eliminating subsidies “could mean less U.S. energy production, fewer American jobs,” and higher oil prices. The evidence suggests otherwise.

On Sunday, the New York Times reported that BP was able to write off the rent it paid for use of the failed Deepwater Horizon rig, saving the company $225,000 per day. The tax code is actually riddled with credits and giveaways to the oil industry like thus, despite the industry’s sky-high profits in recent years.

While corporate welfare for oil companies is especially egregious, there are plenty of tax expenditures — which are spending programs administered through the tax code — that help pet industries without doing much for anyone else. For instance, there is a tax subsidy for NASCAR racetrack owners that will cost taxpayers nearly $50 million, and another for purchasing fertilizer that will give big agricultural companies $1 billion in free money.

Both the Obama administration and some members of Congress have tried to do away with some of these subsidies, but have had little success so far, due to, among other things, lobbyist arguments that cutting subsidies will harm the economy. And it’s not only at the national level that these subsidies have a way of hanging around with little to no scrutiny.

As Stateline reported today, Gov. Jay Nixon (D-MO) has appropriately called the growth of tax credits in his state “rapid and unchecked,” adding that “every dollar we spend on tax credits is a dollar that isn’t available for K-12 schools to invest in teaching, reading, math and science.” But he now wants to create a $150 million credit for car manufacturing in order to entice Ford to overhaul a factory in the state:

Governor Nixon argues that these incentives are critical to preserving Missouri’s century-old auto industry and would help position the state as a leader in advanced manufacturing…Missouri is not the only state that seems to be of two minds when it comes to business tax breaks. Iowa and Colorado also recently stopped to reexamine their tax-incentive programs, in hopes of keeping the ones that pay proven dividends and getting rid of the ones that some would call corporate welfare. But those states, too, are finding that controlling the growth of business tax breaks is easier said than done — especially when thousands of jobs seem to be on the line.

Highlighting the growth of this sort of spending, Missouri currently has 51 different tax credits, and “the cost has grown from $145 million, or 3 percent of related taxes in 1999, to $588 million, or 8 percent of related taxes in 2009.”

Now, some of those programs may be totally worthwhile and even merit increasing. But others are surely wasteful and should be overhauled or scrapped. Doing so — both at the state and the federal level — could save governments a considerable amount of money that could be invested in endeavors that actually create jobs.