Appearing on Fox News Sunday with Chris Wallace, Sen. Jon Kyl (R-AZ) argued that budget talks should not include the reduction of oil and gas subsidies. Kyl, who abandoned budget negotiations with the White House this week, claimed that eliminating $2 billion in annual subsidies for the richest oil companies — instead of slashing programs that feed the poor and protect the middle class — would “hurt the American consumer”:
First of all, if you want gas prices to rise and pay more than $4 at the pump, go ahead and do this. That is not what we should be about right now. That kind of tax increase is going to flow right to the consumer. Everybody knows that. Secondly, you are picking out one industry in the United States, an industry that employs almost 10 million people, represents 7.5% of the Gross Domestic Product. You’re saying to them you are not going to get the same tax treatment that all other manufacturing corporations get in the United States. So we’re going to punish you, because you make a lot of money. It’s also true with those big profits, they have enormous costs of investment. Of course, you covered the issue of how much it costs to put one of those platforms out in the middle of Gulf of Mexico. Billions of dollars. Big money all the way around. You’ll hurt the American consumer if you impose more taxes on them.
Kyl is not telling the truth about oil and gas subsidies:
Eliminating Oil Subsidies Won’t Raise Gas Prices. Eliminating Big Oil’s subsidies would have very little effect on gas prices. The subsidies have little to no influence on the investment decisions oil companies make, especially with the price of oil around $100 a barrel. Instead, the tax breaks simply pad oil profits, and are funneled into “obscene” executive pay schemes and shareholder payoffs. Even the American Petroleum Institute, which opposes cutting the subsidies, has admitted that eliminating subsidies wouldn’t affect gas prices.
The Oil And Gas Industry Employs About 700,000 Americans, Not “Almost 10 Million”. A report prepared for the American Petroleum Institute in 2009 estimated the the oil and gas industry involves only 2.1 million direct jobs with 7.1 million indirect and induced jobs. But even the 2.1 million jobs figure is grossly inflated. According to the U.S. Bureau of Labor, oil and gas drilling — the industries directly affected by most of these subsidies — only employed 63,012 jobs in September 2009, the most recent reporting period. U.S. Department of Labor 2007 statistics indicate the drilling and production of oil and natural gas, plus support activities directly account for 425,025 jobs. If sectors such as oil refineries and natural gas distribution are included, even though they are unaffected by drilling subsidies, the total increases to 743,825 jobs. According to U.S. Bureau of Economic Analysis data from 2009, the drilling and production of oil and natural gas directly generates 799,100 jobs.
Taxes aren’t dollars that disappear, and the payment of taxes isn’t a punishment for successful businesses, like the oil industry that gets over $7 billion in subsidies a year, far more than the Obama administration has proposed cutting. Taxes paid go back into the American economy, supporting the long-term investments that make the United States the richest nation on earth.
For example, taxes support public universities like Arizona State, where Kyl earned his bachelor’s and law degree. Taxes pay for the electoral system that Kyl joined as a member of Congress in 1986, where he has been taxpayer-funded ever since. Then again, Kyl has also directly received $333,332 from the oil and gas industry in political contributions over his career. Maybe he is just concerned about protecting his own personal oil and gas subsidies, which he receives on top of his taxpayer salary.