Posted on 22-5-11
Taxpayers Subsidize Big Oil, World's Most Profitable Industry
By Rinaldo Brutoco and Madeleine Austin, 20 May 2011, World Business Academy
The US Senate couldn't muster the votes to end $2 billion a year in taxpayer
subsidies for the five biggest US oil companies. The House had already voted to
block efforts to repeal tax breaks for Big Oil, in sharp contrast to its vote to
strip tax credits for small business health insurance.
The Congressional votes create a strong contrast between the US and other countries,
including Germany, China, the Scandinavian countries, and most recently, Japan, who
are leading the way to a new planetary fuel system that will replace oil and nuclear
energy with renewable energy. In response to its nuclear disaster, Japan has
renounced its plans to build new nuclear plants and announced it will redo its
energy system "from scratch." Germany is using the Fukushima disaster as an
opportunity to curtail nuclear power and boost its strong clean technology export
sector. Other countries have curtailed or suspended their nuclear plans. But the
United States, once a leader in science and technology that beat other countries to
the moon, remains controlled by money politics, Big Oil, and climate deniers.
The oil industry is the most profitable industry in the world. US oil companies earn
about $3 billion in profits every week, yet get $4 billion in taxpayer subsidies
every year. In the first quarter of 2011, Big Oil's profits were up 38% from the
first quarter of 2010.
The industry's outsize profits didn't stop it from squealing like a stuck pig over
proposals to trim $2 billion from its annual subsidies and use the revenue to reduce
the deficit by about $21 billion over 10 years.
The oil companies tried to characterize the end of their subsidies as a "tax hike,"
despite growing and widespread recognition across the political spectrum that tax
breaks are just another form of government spending, one of several ways to provide
direct support for an industry. Before becoming Speaker, John Boehner (R-Ohio)
admitted that "tax deductions, credits, and special carve-outs . . . what Washington
sometimes calls tax cuts are really just poorly disguised spending programs ...."
As a recent Washington Post editorial about such "tax expenditures" pointed out, "an
astonishing amount of "spending" more than $1 trillion annually is accomplished
through the tax code, by way of tax credits or deductions. But there is little
conceptual difference between billions spent to directly subsidize particular
programs and billions spent indirectly in tax preferences. Either way, it's money
the government does not have, and that adds to the deficit."
The Senators who opposed ending the oil subsidies received 5 times more in campaign
cash from the oil industry during their time in Congress than the Senators who
favored ending the subsidies (on average, $370,664 versus $72,145), according to an
Oil Change International and Public Campaign Action Fund analysis of data from the
Center for Responsive Politics.
Who's benefitting from the US oil industry's taxpayer subsidies? Certainly the oil
companies' CEOs. Last year the CEO of Occidental Petroleum, the 4th largest US oil
and gas company based on market capitalization, was near the top of a list of the
median pay for top executives at 200 major companies. Occidental's CEO took home
$76.1 million, up 142% from the year before, despite a majority "no" vote by
shareholders on his pay package.
Exxon CEO Rex Tillerson earned $21.7 million in 200912 times more than the $1.8
million earned last year by the CEO of the Norwegian energy company Statoil, which
is 2/3 owned by the Norwegian government. Tillerson's pay was "more than double the
combined $8.3 million that Statoil paid its nine top executives in 2010." [The
comparisons are based on the most recent pay figures available.]
The average American pays a higher income tax rate than ExxonMobil, which is the
most profitable Fortune 500 company for the 8th year in a row.