President Obama has identified over $4.7 billion that the oil and gas industry should pay under standard tax rules this year but that will remain in company coffers because the industry receives preferential treatment in the code. This special treatment gives oil and gas companies advantages that most other companies, individuals, and families don’t receive, and ultimately leaves more money in oil and gas companies’ pockets and deprives taxpayers of badly needed funds. In the next ten years, this special treatment will allow oil and gas companies to keep over $38.5 billion that they’d otherwise owe.
In his recent energy speech in New Hampshire, President Obama renewed his call for an end to taxpayer subsidies to the oil and gas industry. Fearing that these hard won giveaways are at risk, Jack Gerard, of the American Petroleum Institute, responded by denying that the industry receives subsidies.
“It is factually wrong for the president to say that the industry receives subsidies,” Gerard said. “A subsidy is a direct payment of money to a person or business by American taxpayers. The president has it backwards; our industry pays the government nearly $90 million a day — the biggest contributor of government revenue than any other industry in the United States.”
Jack Gerard is relying on a tortured definition of subsidies that doesn’t comport with plain English. The American Heritage online dictionary defines a subsidy as “Monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest.”
If Gerard wants to argue that oil and gas tax giveaways are not subsidies because they are not “regarded as being in the public interest” I might agree with him, but it strains credibility for him to say that special treatment allowing corporations to keep $38.5 billion that they would otherwise owe in taxes isn’t “monetary assistance.” If my friend owes me $50, and I tell her she can just pay me $25, I’m giving her a gift of $25. She’ll have an extra $25 in her pocket because of my decision to give her special treatment, and of course, I’ll have $25 less. It is no different when a company’s tax bills are slashed through tax breaks; that company is receiving a subsidy. When oil and gas companies end next year with an extra combined $4.7 billion in their bank accounts, it will make little difference to them or to anyone else whether they received this money as checks or were absolved from paying taxes they should owe under standard U.S. tax rules; either way, the money will be theirs.