Classic Who: What They Don’t Tell You About Oil Industry Tax Breaks

The post Classic Who: What They Don’t Tell You About Oil Industry Tax Breaks appeared first on WhoWhatWhy.

In 1956, sociologist C. Wright Mills wrote in his work The Power Elite, “Tax rates being high, the corporate rich are quite nimble in figuring out ways to get income, or the things and experiences that income provides, in such a way as to escape taxation.”

Individuals in the very top tax bracket in 1956, during the Eisenhower presidency, paid 91% of their income to Uncle Sam, while corporations paid 52%.

In 61 years, a lot has changed, but so much has stayed the same. Tax rates for the rich have fallen. Today the highest individual tax rate, for those who can’t hire a team of lawyers and accountants to get around it, is 39.6%, while corporations pay a nominal rate of 35%. Yet Republicans are not satisfied with these cuts and champion lower rates, promising economic manna as a result.

While rates have come down, the tax loopholes of which Mills spoke have only grown more complicated. Every year tax reform is publicly advocated, but the voluminous IRS tax code remains intact. One notable loophole is the oil and mineral depletion allowance.

Mills wrote, “Aside from capital gains, the most profitable tax loophole is perhaps the ‘depletion allowance’ on oil and gas wells and mineral deposits.” The law essentially treats oil or mineral resources as depreciable capital assets and allows a certain percentage of gross income to be deducted each year based on the resource. There are many related subsidies and tax breaks that benefit the oil and gas industries. Each year alone, taxpayers subsidize the oil industry by more than $4 billion.

It remains to be seen whether President Donald Trump will try to keep these subsidies in place. The outlines of his tax plan, while dramatically lowering the corporate rate from 35% to 15%, mentions “eliminating tax breaks for special interests.” But it’s clear that his energy policy is beholden to Big Oil. While the majority of climate scientists and nations are sounding the alarm on global warming, the president pulled the US out of the Paris Accord, and has previously called climate change a hoax invented by China. He has placed Rex Tillerson, former CEO of Exxon Mobile, as Secretary of State.

We thought it would be a good time to rerun this article.

Editor’s note: This article originally ran 05/23/2011.

So I was reading this New York Times explainer on yet another failure to take the oil industry off the sweet, sweet gravy train. And my mind went back a bit to what’s missing from the current discussion — the long, long history of tax breaks this powerhouse industry has won for itself over decades. It’s a little scary, though, so brace yourself.

Coming up: the history. But first, the Times:

The Senate on Tuesday blocked a Democratic proposal to strip the five leading oil companies of tax breaks that backers of the measure said were unfairly padding industry profits while consumers were struggling with high gas prices.

Despite falling eight votes short of the 60 needed to move ahead with the bill, top Democrats said they would insist that eliminating the tax breaks to generate billions of dollars in revenue must be part of any future agreement to raise the federal debt limit.

“We have to stand up and say, ‘Enough is enough,’ ” said Senator Al Franken, Democrat of Minnesota. “While oil prices are gouging the pocketbooks of American families, these companies are on a pace for a record profit this year.”

The defeat on Tuesday was expected since most Republicans were dug in against what they saw as a politically motivated plan in advance of the 2012 elections. Democrats had hoped that directing the savings toward the deficit would make it harder for Republicans to reject it.

The statement above, by the New York Times reporter, is an example of the maddening sort of thing common in the so-called “mainstream” press as it struggles to appear “fair and balanced.” Even Republican politicians would admit in private that they are never opposed to anything principally because it is “politically motivated.” Almost everything they do is politically motivated — if not for attracting voters than for appealing to financial backers. Please name one politically suicidal act of conscience performed by the GOP lately — or in the last ten years.

In the 52-to-48 vote, 3 Democrats joined 45 Republicans in opposing the bill, which was supported by the Obama administration and fiscal watchdog groups that saw the tax help for the oil industry as wasteful. Forty-eight Democrats, two independents and two Republicans backed it.

It’s not that it is wasteful. It’s that it is welfare for the rich — giving an unnecessary advantage to those who already have every advantage.  

Read more https://whowhatwhy.org/2017/06/13/classic-dont-tell-oil-industry-tax-breaks/