President Obama’s Misleading Tax Statement
Last Thursday, President Obama called on Congress to eliminate “subsidies” for oil and gas companies. These “subsidies” or “taxpayer giveaways” the President and his big-government allies keep referring to are actually tax credits and deductions that are available to a broad swath of manufacturing companies. In fact, all other manufacturing companies receive a 9 percent deduction while oil and gas companies only receive a 6 percent deduction Essentially, the President is asking for Congress to impose targeted tax hikes on a specific industry simply because he does not like their product. You never hear the administration decrying tax breaks for technology companies like Apple, even though their profits are soaring.
But one line in the President’s Rose Garden speech really stuck out (emphasis added):
“And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits. In fact, one analysis shows that every time gas goes up by a penny, these companies usually pocket another $200 million in quarterly profits. Meanwhile, these companies pay a lower tax rate than most other companies on their investments, partly because we’re giving them billions in tax giveaways every year.”
To the casual observer, it sounded like President Obama said that oil and gas companies pay a lower tax rate than most other companies. Once you hear that, the fact that he added the caveat “on their investments” barely registers.
And that is intentionally misleading.
Of course, being called on this leads to a nuanced argument. Those “investments” refer to depreciation schedules (an accounting procedure which determines the value left in a piece of equipment). Oil and gas companies are allowed to deduct such expenses quicker than some companies but these deductions are available to all mineral extraction. Others have even more beneficial expensing options. The best solution is for Congress to make immediate expensing permanently available for all business investments because it would allow newer equipment to come online faster, which would improve energy efficiency and overall economic efficiency. Of course, this fact is not the point of what the President was trying to convey, which was a misleading statement trying to make Americans believe that oil and gas companies pay lower taxes than other industries.
This is not true.
The oil and gas industry paid about $35.7 billion in corporate income taxes in 2009 (the latest year data is available). That’s actually more than the industry earns in profits here in America (subs. req’d.).
So not only do the oil and gas companies give $86 million to the government every day, but President Obama thinks they should be paying more. It’s all in the interest of “fairness” after all.