Is it unfair to end tax subsidies for Big Oil? It depends on your political label.
Gas prices are over $4 a gallon at most pumps around the country, up from about $3 a year ago. As gas prices skyrocket, so do Big Oil profits. The five biggest firms made $36 billion in profits—in just the first quarter of this year. At the same time, these firms continue to get tax breaks of about $2 billion a year. Is it time to end these tax subsidies?
Many Democrats in Congress think so. This week, the CEOs of Shell, ExxonMobile, BP America, ConocoPhillips, and Chevron were called to testify before the Senate Finance Committee about record gas prices, profits, and tax breaks.
Big Oil has always been a mystery to me. Somehow, they can have skyrocketing costs (a barrel of crude is $100) and record profits at the same time. For most companies, rising costs depress profits unless the costs are passed through to consumers as higher prices. But cost pass-throughs usually protect profits, not elevate them. But Big Oil has solved one of the mysteries of the financial universe by having all three: high costs, high prices, high profits. And they still get tax subsidies. These subsidies were meant primarily for struggling manufacturing firms, not profit-rich oil companies.
Some call ending the tax subsidies for Big Oil “un-American.” It’s a “vindictive money grab,” says the head of the American Petroleum Institute. Ending the subsidies would “put more people out of work in New Jersey and across America, damage our nation’s energy security, raise energy costs and, ultimately, drive up deficits.” But, the Congressional Research Service says higher gas prices would be unlikely.
Ultimately, this is as much about politics as it is about economics, and those politics can be complex. The political types we’ve discussed this week, based on the Pew Research Center’s new study, have starkly different views on taxes and corporate profits. At one end, few Staunch Republicans (13%) or Libertarians (13%) think corporate profits are too high. At the other end, about three quarters of Hard-Pressed Democrats (79%), Solid Liberals (77%), and Disaffecteds (73%) say that corporate profits are too high. A slight majority of Post-Moderns agree (52%), while just over a third of New Coalition Democrats (38%) feel the same.
How do you feel about ending tax breaks for Big Oil?
Is it just a “vindictive money grab”?
Or would it be the fair think to do?
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(Originally published at www.OurValues.org, an online experiment in civil dialogue on American values.)