But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.
According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.
And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by various credits. These companies’ returns on those investments are often higher after taxes than before.
When your return on investment is higher after taxes, that's what I call a giveaway.
Here’s the part I love:
The American Petroleum Institute, an industry advocacy group, argues that even with subsidies, oil producers paid or incurred $280 billion in American income taxes from 2006 to 2008, and pay a higher percentage of their earnings in taxes than most other American corporations.
Um, so? So what? You're supposed to pay twice or three times what you do, but you want a lollipop for paying something? What, are we supposed to say thank you? Sorry dudes, that’s not how it works. Oil companies are insanely profitable. So pay what you owe and shut up.
You know, one thing I really can’t stand is hearing how solar and wind energy simply are not competitive. Right. Let’s give renewable energy the same tax deal that oil gets, ‘mmkay? And while we’re at it, let’s factor in the true cost of fueling our economy on dead dinosaurs. Let’s include the cost of the environmental damage from air pollution and climate change and oil spills. Don’t forget the $167 billion a year we spend on war to secure our access to oil in the Middle East.
Here is something worth considering:
Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.
Once upon a time, oil was a new technology and the American government felt it worthwhile to encourage this nascent industry with tax incentives and tax breaks. That was a long, long time ago but it's generally how we do things. But oil is no longer a new technology, it's now the big bully on the block. Other nascent industries are coming up and the American government should be encouraging these energy technologies with comparable tax incentives and tax breaks. But any attempt to do so is met with manufactured outrage from people like the American Petroleum Institute. We have to fight tooth and nail for the smallest crumbs, and it's not anything close to comparable to what Big Oil gets.
It's time to demand some parity here.