Tax Breaks For Big Oil…?

Nancy and I received a letter from President Obama today thanking us for our interest in Government spending and the National debt. He assures us that he, too, is very interested in these subjects; and that he is doing all he can to make America solvent.

He pointed out that he has repeatedly called on Congress to stop giving away $4 billion yearly in oil and gas subsides to an industry that has never been more profitable. This kind of talk always brings looks of puzzlement to the faces of tax and energy-industry experts, who ask: “What special tax breaks?”

It is true that the oil and gas business tries to pay as little money for taxes as legally possible—but…who doesn’t?

In 2004, Congress and the Senate passed with widespread bipartisan support the American Job Creation Act. That Act provided a 9% tax deduction from net income for businesses engaged in qualified production activities in the U.S. The Act was designed to encourage domestic manufacturing in the hope that the tax break could provide a competitive advantage against foreign competition and that it would create jobs.

The businesses that might benefit included the oil and gas industry, manufacturers of farm equipment, appliances, pharmaceuticals, and many others. There was one caveat—the oil and gas industry tax break was limited to 6% rather than the 9% granted to the other businesses.

Although he did not say so in his letter, I suppose that President Obama would like to eliminate the tax break altogether for the oil and gas business. These measures are most likely aimed at raising more income for the government to help pay for welfare programs and to reduce the National debt.

On April 3^rd, USA Today published a list of the 10 companies that paid the highest U.S. income taxes in 2012. Number one on the list was Exxon Mobil at $31 billion. Number two was Chevron at $20 billion. Number six was ConocoPhillips at $8 billion. Those three companies together paid more than all the other seven combined.

Hmmm…I wonder—how does President Obama define his idea of a “fair share” of income taxes. It seems to me that the oil and gas industry is certainly paying their fair share.