Senate Majority Leader Reid (D-NV) filed cloture Monday night on Senate Bill 940. In layman’s terms, that means the Senate will hold a vote tonight on Sen. Menendez’s (D-NJ) proposal to selectively eliminate so-called “subsidies” for major oil companies.
DC demagoguery knows no bounds. (And politicians wonder why the public holds them in such low regard.)
Rhetoric propagated by Senate Democrats suggests the tax rules under attack are something unique to the oil industry. Yet, the deductions extend to almost all U.S. companies, including sectors critical to states of the very legislators pushing this bill. The rules are available to the mines and casinos in Sen. Reid’s state, the auto manufacturers in Sen. Sherrod Brown’s (D-OH) state, food producers in Sen. Claire McCaskill’s (D-MO) state, and countless other industries across the nation.
Far from working toward a legitimate overhaul of our tax system, proponents of the Senate legislation are simply engaging in cheap populism.
Not to be out done, commentators are getting in the mix too. In its Sunday editorial, The New York Times took “Big Oil” executives to task for defending their profitability and fighting against proposals to single their industry out for higher taxes. Yet, it’s worth noting the Old Gray Lady’s indignation over corporate “tax breaks” doesn’t appear to extend to those enjoyed by the newspaper industry:
The fact of the matter is that subsidies, which the bill’s sponsors are all experts in dispensing, are funds taken from taxpayers and given to politically favored groups. Tax deductions, on the other hand, involve reductions in taxes paid by a taxpayer. There is a big difference between the two.
Targets of the Senate proposal aren’t special subsidies; they’re deductions and credits available to practically all businesses. One offers a credit for taxes paid to foreign governments for revenue earned abroad. Protection against double taxation is not a giveaway; it is simple fairness.
Even with this tax rule, some or all of these five companies pay more in taxes than their shareholders earn in profit. Eliminating this provision would simply handicap these companies in global competition against foreign, state-owned oil firms.
S. 940 also targets the domestic manufacturing tax credit, which Congress passed to encourage domestic, job-creating investment. Moreover, though the credit is available to all businesses, the oil and gas industry is limited to 6 percent deduction in contrast to the 9 percent enjoyed by every other sector.
Deductions for intangible drilling costs (wages, drilling muds, seismic tests, etc.) are also on the chopping block; yet, they are normal business expenses and should be treated as such. Since IDC deductions encourage the expansion of America’s domestic energy portfolio, they help lower energy costs.
The U.S. faces serious economic challenges — excessive spending, a national debt almost equal to our GDP, high unemployment, and an unfair, incoherent tax system. Our leaders in Congress should be focused like a laser on these and other major priorities instead of attempting to score cheap political points by punishing successful companies.
It’s doubtful that today’s legislation will become law or even pass the Senate. But it still waste valuable time and distorts the public’s understanding of energy related issues.