As he promotes his purportedly "new" budget (which is actually same old), Rep. Paul Ryan (R-WI) is again claiming that the "urgency" of deficit reduction demands severe cuts in most programs, including clean energy, education, health care, and of course, Medicare, Medicaid and Social Security.
But there's one industry that needs to be maintained at current levels - his budget preserves fossil fuel subsidies (yes, Defense too).
"Adding to the $40 billion in existing tax breaks for rich Big Oil companies that are currently profiting from high gasoline prices makes his rhetoric hypocritical at best and a lie at worst," says Dan Weiss, a Senior Fellow and Director of Climate Strategy at the Center for American Progress.
"The public won't be fooled by Rep. Ryan's claims. Hopefully the media won't be fooled again, either," he says.
It's fascinating how Republicans believe the oil industry should continue getting the same support as it has for a century, while none is needed for the young renewable energy industry.
From 1918-2009, the oil and gas industry received $446 billion in subsidies, while the renewable energy industry received just $5.5 billion from 1994-2009. During this time US taxpayers invested $80 in oil for every $1 invested in clean, renewable energy.
Added to that, fossil fuel interests also reap huge subsidies at the state level.
By Dan Weiss
This blog first appeared on ClimateProgress.
American families have been plagued by higher oil and gasoline prices over the past several years despite a significant increase in domestic oil production and a decline in consumption. But while high gas prices threaten the economy and family budgets, they enrich oil companies with huge profits.
Apparently that doesn't bother House Budget Committee Chairman Paul Ryan (R-WI), since his proposed fiscal year 2014 budget resolution appears to again keep a decade's worth of oil tax breaks worth $40 billion for the oil-and-gas industry.
Even more astounding, the budget would give the five biggest oil companies an additional multibillion-dollar tax cut by slashing the corporate income tax rate.
Rep. Ryan's latest budget is a retread of the budget, complete with oil giveaways, that he and Republican presidential nominee and former Massachusetts Gov. Mitt Romney ran on in 2012 - and which was soundly rejected by voters in November. Hasn't Rep. Ryan learned anything?
Big Oil companies continue to rake in the profits, while gasoline prices have risen by 38 cents since January 1 of this year - an 11% increase. What's more, the Energy Information Administration reported that U.S. households spent an average of $2,912 on gasoline in 2012. This is the highest level in four years, equivalent to nearly 4% of the average household income before taxes. Last year the average gasoline price was $3.66 - a dime more than the previous record set in 2011. Time
magazine reported in December that "2012 will go down as the most expensive year ever for gas."
While higher gasoline prices cause families pain at the pump, they are a boon to the world's largest oil companies. The big five oil companies - BP, Chevron, ConocoPhillips, ExxonMobil, and Shell - made a combined record profit of $118 billion in 2012 on top of a record profit of $137 billion in 2011. These companies also have a total of nearly $72 billion in cash reserves. Yet under the Ryan budget, it seems that the big five oil companies would continue to benefit from their $2.4 billion share of the $4 billion in annual tax breaks for all large oil and gas companies.
In addition to the apparent retention of these existing special tax breaks, Rep. Ryan's FY 2014 budget explicitly includes the Romney presidential campaign's economic plan proposal to cut the corporate income tax rate from 35% to 25% - nearly a one-third reduction.
That could provide an additional combined tax cut of at least $2.3 billion annually to the big five oil companies, according to an analysis of their 2011 public financial statements. That includes $1.5 billion for the three domestic oil companies and $800 million for the two foreign-owned companies. Since it is of course impossible to predict their future profits, this estimate is based on their 2011 financial data, including their U.S. federal income tax expense.
Of course Big Oil and the American Petroleum Institute, their wealthy lobbying organization, trot out a number of specious arguments to keep existing tax breaks in place, such as:
- The companies can't afford to lose these tax breaks Fortune magazine ranked ExxonMobil and Chevron as the first- and second-most profitable companies in 2012; ConocoPhillips was the 13th-most profitable company.
The entire industry's total revenue loss from cutting the tax provisions is about 1% over the next decade.
- Removing tax breaks will cost jobsDespite earning more than $1 trillion in profits between 2001-2012, the big five oil companies have been shedding U.S. jobs.
According to company profit reports, four of the big five companies - BP, Chevron, ExxonMobil, and Shell - shed a total of 15,200 U.S. jobs between 2006-2011. (Note: ConocoPhillips does not report employment figures in its 10-K forms.)
- Giving taxpayers' money to oil companies will help increase oil productionThe big five oil companies actually produced 3% less oil in 2012 compared to 2011.
- Big Oil already pays its fair share of taxesThe big three U.S. publicly owned companies - Chevron, ConocoPhillips, and ExxonMobil - paid relatively low federal effective tax rates in 2011.
Reuters reports their tax payments were "a far cry from the 35% top corporate tax rate." Their effective federal tax rates in 2011 were: ExxonMobil, 13%; Chevron, 19%; and ConocoPhillips, 18%.
- Big Oil needs as much capital as possible for explorationIn 2012 the big five oil companies spent nearly $32 billion - or 27% of their profits - buying back their own stock to enrich their top executives, boards of directors, and biggest shareholders instead of using these revenues to produce oil and gas from thousands of undeveloped leases.
Koch Industries is Rep. Ryan's sixth-largest campaign contributor over his career. And the oil-and-gas industry as a whole gave him $264,600 in campaign cash.
Or maybe Rep. Ryan maintained these oil tax breaks because Big Oil gave Republican incumbents and candidates 90% of their $70.5 million in donations in the 2012 election cycle.
This is a higher proportion than the 78% of $348 million in donations Big Oil gave Republican congressional candidates beginning in 1990. The oil-and-gas industry also gave the Romney-Ryan campaign $5.4 million during the 2012 presidential election.
ExxonMobil is currently being pressured by shareholders to stop making political contributions.
Among other outrageous benefits fossil fuel companies get:
- BP, after committing one of the worst environmental disasters in the US, was able to take a tax deduction on the money it spent cleaning up the oil spill in the Gulf of Mexico.
- Coal companies can sign single-bid sweetheart leases to mine on federal lands without paying fair value in royalties to the taxpayers of this country.
- In 2009, Exxon-Mobil, one of the most profitable corporations in this country, paid no federal income taxes, and in fact received a rebate from the IRS. Many other large and very profitable oil companies also have managed to avoid paying federal income taxes in certain years.