Ending Oil Tax Subsidies really “un-American” as ConocoPhilips CEO Has Claimed

In the past few weeks Republicans have made what I think are 2 major votes that directly point to what their priorities are. One was the unanimous vote by GOP to keep $40 billion in tax subsidies for big oil and the other was to end Medicare as we know it. When I look at these 2 bills together, it is striking to me that the GOP did not have any reservation in their choices to pass and/or block these bills. 

The fact that on one hand they say Medicare is unsustainable, therefore, it must end, and then on the other hand giving such huge tax break to big oil, keeping in mind their recent profits have been record-breaking and the top 5 oil companies are now ranked as the most profitable companies IN THE WORLD, it is an absolute insult to me and should be for every American, conservative or liberal. 

One thing that has not been talking about much is what are the effects of these tax breaks on the clean-energy and renewable-energy companies. These up and coming companies are put at a disadvantage because they can’t compete at the same level as big oil. 

American oil and gas companies have had a century of built-in advantages. For example, they are allowed to deduct “intangible drilling costs” — including labor and drilling fluids — the moment a well is tapped (even if it proves to be dry). And then there’s the “depletion allowance,” which allows certain extractors to shelter around 15% of a well’s production from the IRS. And deductions for royalties paid to foreign governments. And the oil and gas liability cap that remains at just $75 million, more than a year after the BP rig explosion. Then there’s Section 199, which allows profitable oil and gas companies to deduct 6% of net income.

If Republicans really wanted to support capitalism, they would end the socialization of these companies and create an environment for companies that truly promote competition and innovation. 

What oil companies truly fear, I think, is unshackled innovation — and even a modest loss of market share. Rather than trying to outsmart the upstarts, the oil companies spend their time trying to scare us into codifying their supremacy. ConocoPhillips (CEO James Mulva recently said that a Senate Proposal to end $4 billion of oil subsidies was “un-American.”  No, Mr. Mulva, it’s pro-capitalism.

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8 responses to “Ending Oil Tax Subsidies really “un-American” as ConocoPhilips CEO Has Claimed

  1. John Chambless

    What does one consider “American”? Or for that matter “un-American”? Is it to promote the best for the most, while protecting the rights with the least? Or to promote the most for the few and protect nothing for the rest?

  2. My take away from writing this post is the fact that Republicans claim to be pro-Capitalism is counter to the votes and bills they pass and/or block. They are actually supporting anti-capitalism when the continue tax cuts that do nothing to promote innovation and business growth. This also supports corporation socialism.

  3. Tax reform is the answer, but in our heated partisan environment it is difficult to even begin a discussion. The statutory tax rates are actually quite high. In saying this, I would likely be attacked by otherwise like-minded liberals. But the statutory rates only apply to the “small players” and mid-size competitors that simply can’t afford the expertise of a tax lawyer or an “army” of Corporate Attorneys and Lobbyists. The effective tax rate is much lower, on average. Generally quoted at 16%-17%, but that includes the small and mid-size paying close to statutory rates. The Big Players are paying much lower effective rates, 4%-6%. The “refunds” and “rebates” are a bit misleading since they are based on over-payments in previous tax years, generally.
    The basic point is that our statutory rates ARE “too high” and serve as an obstacle to competition from start-ups. The Big Players may crow about these excessive rates, but only to justify more lobbying for more targeted incentives that only apply to their specific R&D or exploratory drilling projects. They prefer to leave the statutory rates high since it gives them a competitive advantage.
    President Obama touched on tax reform and my immediate response was, “no, no, no…bad timing, Mr. President”. He was honest and included the fact that the statutory rates would be lowered in conjunction with the repeal of tax incentives and tax benefits. All the left heard was “lower Corporate taxes” (after the 2010 tax “compromise” the pitchforks were at the ready). But if we look at the current reality that the average effective tax rate is 16%-17%, lowering the Corporate tax rate to 26% would greatly increase actual revenues. Particularly when the most profitable Corporations are paying an effective rate of 4%-6%. There’s a huge “learning curve” to overcome with regard to the voter base to fully appreciate the counter-intuitive at play here. There’s also the misinformation train that will confuse the issue. Lastly, tax reform MUST be comprehensive, meaning the repeal of “loopholes” (tax incentives) have to be passed to trigger ANY reduction of the statutory rates.
    The current Democratic strategy seems to be an effective one. By bringing the subsidies under the spotlight, it raises awareness of these incentives and puts the focus on the repeal aspect. The goal is to get Corporations to essentially “offer” to trade in their tax incentives for a reduction in tax rates, something they do NOT want to do, just yet. It’s important for liberals to continue the dialogue on repealing tax incentives and pressure Congress to NOT back down. Make it an issue that “resonates” through daily or weekly reminders to your Congress.

    • Hi BlueTrooth,

      You make some great points. I do agree with you that lowering corporate tax rate would increase revenue but only by closing loop holes that allow them to pay as little as 0% in taxes.

      Also, I go back to what I referenced with oil tax subsidies. Because they contribute so much money to our representatives to get re-elected, it is unlikely these will be ended, and this is hampering growth for smaller companies to make achievements in the area of clean energy. Also, this allows the oil industry to actually slow down the pace of new innovations in clean energy.

      • Agreed. It’s easy to think of the subsidies as a singular line item that can be repealed with a simple piece of legislation, but they are more complicated than that. And there are clean energy incentives in the package. Recently, GE has taken advantage of clean energy incentives to make impressive gains in Solar power. Personally, I believe the best approach to clean energy is through grants and no-to-low interest rate loans in combination with a jobs program aimed at building a nationwide smart grid (but that’s another topic of discussion). As you point out, the current approach that relies on incentives/subsidies to established energy providers puts the pace of innovation in the hands of Corporations that are essentially in competition with emerging technologies. How do we force Congress to wean themselves off of Big Oil contributions? Maybe a “Grover Norquist” strategy of signing a pledge? Actively recruiting candidates at all levels that are committed to sustainability? Ultimately, campaign finance reform starting at the State level may be our best strategy.

  4. John Chambless

    Blue…

    Nice argument, however, I had a stroke 5+ years ago and a part of my brain may never recover. And I fear many of the Tear Party’ers are just a s bad off as me. There’re just on the other side of the fence. Our only recourse is TRULY to use the Constitution (such as it is) and have all the Progressives (Liberal Democrats, Independents, “Eisenhower” Republicans, etc) we can find and get them to the polls on each and every Election Day.

    The Reactionaries (Conservatives, Tories, Monarchists, Corporatists, Plutocrats, etc.) will do everything they can to protect what they have and use it to get more. Two hundred and fifty years ago, Progressives had no other option. We now have one… we need to use it.

    • Hi John,

      Your solution is direct and to the point. Our number one focus has to be getting out the vote. Ignore the attempts to suppress voters and just get out there. Challenge our neighbors to make their vote count. Excellent point.

  5. John Chambless

    The solution…? @YouGottaVote!

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