Putting oil industry subsidies on the table

PUTTING OIL INDUSTRY SUBSIDIES ON THE TABLE…. Under the circumstances, it’s tempting to think Congress wouldn’t have too much trouble ending breaks for the oil industry — energy giants have enjoyed remarkable generosity for quite a while.

[A]n 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.

“The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. “There is no reason for these corporations to shortchange the American taxpayer.”

The Center for American Progress’ Sima J. Gandhi told the NYT, “We’re giving tax breaks to highly profitable companies to do what they would be doing anyway. That’s not an incentive; that’s a giveaway.”

The report added, however, “Despite the public anger at the gulf spill, it is far from certain that Congress will eliminate the tax breaks.”

It didn’t say which party will be pushing to protect the oil industry, but it’s not a stretch to suspect Republicans will play their traditional role.

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Steve Benen

Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.