Exxon and Shell reported blockbuster first-quarter results Thursday morning, adding fuel to a simmering political debate about federal tax breaks for big oil and the related issue of “windfall” profits.
Earlier this week, House Speaker John Boehner seemingly opened the door to a renewed discussion of eliminating federal tax breaks for big oil companies, which total $4 billion annually.
Speaker Boehner quickly recanted, but Democrats seized on the hot-button issue.
“As we work together to reduce our deficits, we simply can’t afford these wasteful subsidies,” said President Obama, whose approval ratings have tumbled as gasoline prices have surged this year. Yesterday, Senate Majority Leader Harry Reid said he hopes to hold a vote on eliminating the subsidies as soon as possible.
Given unanimous Republican opposition to a similar House proposal in March, the likelihood of any bill passing is low, but opponents of big oil are ramping up the rhetoric.
Tax breaks for oil companies are “completely unnecessary,” says Daniel Weiss, a senior fellow and director of climate strategy at the centre for American Progress.
The tax breaks make “no fiscal, moral or political sense,” Weiss says, noting the $4 billion in annual tax breaks for oil companies exceeds the cuts in Medicare in the budget planned recently passed by the House. “That’s crazy.”
Instead of tax breaks, Weiss proposes a 1% tax on oil company profits, with the proceeds to be used to fund clean energy alternatives and other measures to wean American off foreign oil.
“Oil companies are making a windfall because of political instability and speculators driving up the prices,” he says. “We’re saying, let’s stop giving them big tax breaks.”
The Daily Ticker extends an open offer to representatives of major oil companies to respond to Weiss and other critics. In the meantime, a blog on ExxonMobil’s Website by Ken Cohen, VP of public and government affairs, provides “a few things to consider when you see the inevitable headlines and sound bites about high gasoline prices,” including details about Exxon’s tax burden.
In 2010, Exxon’s total taxes and duties to the U.S. government topped $9.8 billion, making the company one of the largest taxpayers in America, he writes. In the past 5 years, Exxon has paid nearly $59 billion in U.S. taxes.
“Critics often try to ignore these facts by saying the oil and gas industry receives ‘subsidies’,” Cohen writes. “But what they really mean is that they want to increase our taxes by taking away long-standing deductions for our industry while leaving these same deductions in place for other sectors of the economy.”
What do you think: Are oil companies being unfairly targeted or should these tax breaks be eliminated?