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The facts of Big Oil’s tax loopholes and windfall profits

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"The facts of Big Oil’s tax loopholes and windfall profits"

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Tax loopholes allow Big Oil companies to ratchet up their annual earnings at the expense of American taxpayers. Well-placed campaign contributions to their congressional allies preserve these undeserved handouts.  Daniel J. Weiss and Valeri Vasquez have the detailed numbers in a CAP repost.

Americans eager to reduce the mammoth federal debt that threatens our economy’s long-term prosperity overwhelmingly support ridding the tax code of these unnecessary subsidies. As Seth Hanlon, Director of Fiscal Reform, and Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress, explain, tax breaks for oil companies and other superfluous “spending in the tax expenditure budget is fertile ground for deficit reduction.” But on May 5, Republicans unanimously voted down a Democratic attempt to put forward legislation that would end subsidies to oil companies. Seven Democrats also opposed the measure.

So here is a by-the-numbers examination of what Big Oil is costing us, plus a few examples of where the billions of dollars salvaged from their balance sheets might be better spent.

The cost of Big Oil’s loopholes

  • $4 billion: Cost of Big Oil tax breaks in 2011.
  • $2 billion: Cost of Big Oil tax breaks eliminated by S. 940.
  • $77 billion: Cost of Big Oil tax breaks from 2011 to 2021.

Big Oil profits pile up

  • $902 billion: Total profits for the five biggest oil companies in the United States, 2001-2010 (in 2011 dollars).
  • $32 billion: Total Big Oil earnings, first quarter of 2011. Exxon Mobil alone accounted for $10.7 billion of that figure.
  • 38 percent: Big Oil’s first-quarter-2011 profit increase over the first quarter of 2010.
  • 28 percent: Increase in gasoline prices compared to 2010.
  • 53 percent: Portion of their profits that both Exxon Mobil and ConocoPhillips spent repurchasing stock to drive up their companies’ share values in the first quarter of 2011.
  • $8 billion: The amount of first-quarter profits the big five companies spent on stock buybacks.

Low effective tax rates for Exxon Mobil

  • 17.6 percent: Average effective federal corporate tax rate paid by Exxon Mobil, 2008-2010.
  • 20.4 percent: Average American individual federal effective tax rate in 2007 (the last year of available data).

Oil campaign cash and votes to close loopholes

  • $273,500: Big Oil campaign contributions to Republican senators and representatives in the first quarter of 2011.
  • $7,000: Big Oil campaign contributions to Democratic senators and representatives in the first quarter of 2011.
  • 2: House Republicans who voted to cut tax loopholes for Big Oil during debate on H.R. 1230.
  • 147: House Democrats who voted to cut tax loopholes for Big Oil during debate on H.R. 1230.
  • 0: House Democrats who voted for $30 billion in Medicare cuts in the FY 2012 budget resolution that was passed by the House on April 15.
  • 4: Republicans who voted against $30 billion in Medicare cuts in the FY 2012 budget.
  • 44: Senators who voted to close Big Oil tax loopholes and use savings to offset health care costs.

Public supports ending tax breaks

What oil tax dollars could buy

  • $21 billion reduction in the federal budget deficit by enactment of the Close Big Oil Tax Loopholes Act (S. 940), which would close tax loopholes for the big five oil companies over the next 10 years.
  • $30 billion for Medicare if tax loopholes were eliminated for all Big Oil companies. This would offset the Medicare cuts in the fiscal year 2012 budget resolution that was passed by the House on April 15.
  • $1 billion could pay the salaries of 18,000 high school teachers earning an average of $55,000 per year.
  • $1 billion could pay for 251,000 Pell Grants to aspiring college students. These grants are essential to help these scholars pay for tuition, and averaged $3,984 apiece in 2011.

Senate Democratic leaders are determined to stem these unnecessary subsidies flowing to the five biggest oil companies””BP p.l.c., Chevron Corp., ConocoPhillips, Exxon Mobil Corp., and Royal Dutch Shell p.l.c. The Senate is expected to vote next week on the Close Big Oil Tax Loopholes Act (S. 940), introduced by Sens. Robert Menendez (D-NJ), Sherrod Brown (D-OH), Claire McCaskill (D-MO), and 24 other senators. It would close $2 billion worth of tax loopholes for these five companies. Senate Majority Leader Harry Reid (D-NV) and Finance Chairman Max Baucus (D-MT) also support cutting off the corporate welfare given to these oil companies.

On May 12, the CEOs of the big five oil companies will testify about these tax loopholes before the Senate Finance Committee. Hopefully they will explain how they can justify spending billions of dollars on these tax loopholes when other priorities face severe cuts.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. Valeri Vasquez is a Special Assistant on the Center’s Energy Opportunity policy team.

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5 Responses to The facts of Big Oil’s tax loopholes and windfall profits

  1. Mike Roddy says:

    Thanks for this. The Democrats have been handed the perfect issue- I like the Menendez bill’s blunt title, too.

    Watch, though- the Democratic candidates’ message on this will be muted or nonexistent during the 2012 election, since they don’t want to hurt the feelings of their fellow Democrats who are sidled up to the trough. Greens or fed up Democrats should stay home or vote Green when the Senators who voted with the Republicans here run for office again. Senators who fail to make this and other oil company hugs an issue need to be confronted. Then maybe they will listen.

    If our leadership- including the President- continues to use clean energy transformation as a throwaway line instead of a committed strategy, the people must respond.

  2. Jeffrey Davis says:

    Probably a potential subject for its own thread, but WikiLeaks is revealing how the Arctic nations are racing to carve up the resources that are now accessible because of the dramatic decline in Arctic ice cover.

    Teach the controversy. Exploit the reality.

    Don’t print this if you’ve got a separate thread on the issue planned.

  3. Leif says:

    Part of the problem is that too many Democrats have their hands in the Cookie Jar as well. This is, as Mike Roddy states, a clear winner with easy “tit for tat” understanding that is hard for big money to counter with yet more money. The bigger issue is that ALL the Democrats are beholden to the Capitalistic System of Capitalism without constraints. Even the Industrial Military Complex for that mater. Without a Capitalistic system structured with the welfare of humanity and/or Earth’s life support systems first and foremost and “Fat Cats” at least down the list a little bit, long term prognosis looks bleak indeed.

  4. OregonStream says:

    It looks like a major line of argument on this has become “taking away our tax breaks will mean fewer jobs/less economic development”. Will companies like XOM really pay so much less in tax to extract overseas that they would abandon future projects here? Seems questionable, especially given the overall trend in prices. If the U.S. has as much economically recoverable oil as some suggest, a bit of tax shouldn’t stop them, eh? Or are many of the planned projects so bad or marginal in their economics that they aren’t even a good investment beyond inflating reserve estimates and stock prices?

  5. pboondoggles says:

    “Subsidizing” The Congress
    (Directly or indirectly?)

    Where will the money to pay Orrin Hatch come from
    If tax breaks for Big Oil should ever expire?
    How un-American if foreign oil companies
    Found our “legislators” were no longer for hire.

    Aren’t we as corrupt as a dictatorship?
    Don’t we let Koch money determine the scores?
    Look how our Supreme Court has said it’s OK
    To keep John names as secret as Congressional whores’.

    Why does Big Oil need any “standard deductions”
    As incentives to drill for what’s ours till we let them?
    Aren’t they making enough by doubling gas prices?
    It’s the prices of Congressmen we should condemn.

    Theirs and the lobbyist networks they’re funding.
    The media won’t fight it. They’re getting theirs, too.
    And who pays the price in gas and in batteries?
    Folks stranded at home with TV clickers like you.

    Still we pay The Congress to fly home ev’ry weekend,
    Or stay in DC to woo chicks on their staffs.
    Why is it that after Big Oil helps us elect them,
    So many, like Ensign and Gingrich, just do it for laughs?

    Bob Carlson
    http://www.politicalboondoggles.com
    On Twitter @PBoondoggles
    5/14/11
    To ‘Campaign Contributions 101:
    Role of big oil companies in campaign funding’
    To ‘Big Oil: Ending Tax Breaks Would Be ‘Un-American,”
    To ‘Orrin Hatch Defends SUV’s, Minivans
    and Oil Company Tax Breaks’
    To ‘Creepy Orrin Hatch Verses’
    To ‘The 12 Juiciest Bits From the Ensign Sex Scandal Report’
    To ‘Gingrich’s Sideshow Verses’
    To ‘The Eleven Craziest Things Newt Gingrich Has Ever Said’
    To ‘Secret Koch Boy Conspiracies’
    To ‘Tax Breaks and Oil Subsidies Verses’