Unwilling to reign in Washington’s overspending problem, Democrats and their allies on the Left are stuck championing tax increases. Raising the corporate income tax rate—already the highest in the world—or increasing the personal income rate is untenable, leaving Democrats no choice except to try and repeal tax credits and deductions.
With oil and natural gas companies releasing their first quarter earnings this week, look for revenue hungry Democrats and to set their sights on this industry. First out of the gate is the League of Conservation Voters (LCV) which began asking Members of Congress to pledge to raise taxes on American oil and natural gas companies by eliminating a handful of pro-growth deductions. The LCV pledge reads:
“With five biggest public oil companies enjoying $60 billion in profits and Americans struggling with high gas prices, we should no longer force Americans to subsidize oil companies. I hereby pledge to end taxpayer subsidies and handouts for oil companies.”
Let’s cut through the hyperbole. Unlike renewable sources of energy which received $60 billion in taxpayer dollars since 2008, the American government doesn’t give oil and natural gas companies a cent to produce oil. The LCV’s characterization of tax credits and deductions as subsidies is intentionally misleading. A subsidy is when the government takes money from you and gives it to someone else, like a solar company. Allowing a company to keep more of its earned money by employing a tax credit is anything but a subsidy.
You would think from the LCV’s pledge that oil and natural gas companies pay virtually no taxes and are gaming the system for profit. This could not be farther from the truth: paying nearly $100 million a day in income taxes—and $300 billion in total income taxes between 2004-2008—the oil and natural gas industry’s effective income tax rate is 48 percent, compared to 28 percent for other S&P; Industrial companies. And that’s just income taxes, those numbers don’t even include an additional $60 billion in non-income taxes or $350 million in excise taxes paid on petroleum products.