Friday, May 10, 2013

Big Oil Tax Myth----Weekend News

Time To End The Myth Of Tax-Subsidized Big Oil

Tax day has come and gone, leaving most Americans shaking their heads once again at all the time and effort involved in this annual rite of spring
Similarly, businesses of all stripes — not the least of which is the oil and gas industry — have their day of reckoning with the tax collector.

Contrary to the myth spread by detractors, there are no special subsidies for the industry, which supports more than 9 million jobs.

In fact, one overview from pegged the overall effective tax rates of the Big Three oil and gas firms at 41.5% to 48.3%, depending on the company.
These rates were the highest among the 25 top taxpaying companies (in terms of dollar amounts) that Forbes surveyed.

Others, ranging from the American Petroleum Institute to the U.S. Energy Information Administration, have also put the burden near or above 40%.
Furthermore, even though oil and gas firms report large profits measured in dollars, the margin they get to keep as a percentage of total receipts is much lower than many other industries due to the high cost of investment.

As statistics on Yahoo Finance indicate, the most profitable part of the oil and gas sector — drilling and exploration — stood at an 11.4% margin as of April 29.
More than three dozen other categories — such as brewers (15.2%), personal computers (20.7%) and periodical publishing (21.4%) — were ranked as more profitable.

Despite clear evidence that oil and gas companies are already paying their fair share, the industry remains a favorite whipping boy for politicians in Washington.
Almost every major policy proposal, speech, or campaign rally seems to contain the requisite railing about "Big Oil's special tax breaks."
'Tax Breaks' That Aren't

On further examination, some of these "tax breaks" are widely available and are put in place to take a bit of the pain away from one of the worst corporate tax bites in the world. It's hard to argue energy gets special treatment.

For instance, the domestic production activities deduction, used by numerous major corporations, including GE and Apple, ensures that businesses receive some relief for keeping well-paying jobs here in America.
This is no substitute for a simpler tax system with lower rates, but it's well-intentioned.

Equally puzzling is the reluctance of federal officials to carefully utilize our natural resources on federal lands to increase revenues and job development.
Over the past several years, Congress has dominated headlines with political posturing over fiscal issues.
While many things have contributed to this situation, the current administration could go a long way toward finding a compromise if the Interior Department expedited energy exploration on federal lands.

According to a recent study from the Institute for Energy Research, this approach would provide nearly $2.7 trillion in federal tax revenues in the next 37 years while creating almost 2 million jobs in roughly the same period.
Millions Squandered

Additionally, IER has found that America's natural resources far surpass previous estimates and would be well suited to accommodate such an increase.
After wasting tens of millions of dollars on boondoggles such as Solyndra and Fisker, some support should exist in Washington for retuning federal policy and emphasizing private investment over more taxpayer-backed "stimulus" programs.
As the economy continues to sluggishly recover and working families everywhere feel the pinch of higher prices (not to mention taxes), public officials should support common-sense legislation that lets energy producers play a bigger part in solving our current woes.

The oil and gas industry has already proved it is willing to create jobs, develop our resources responsibly and pay its fair share in taxes.
Lawmakers should unleash the potential of federal lands for safe exploration and let the nation reap the rewards.

• Sepp is executive vice president for the 362,000-member National Taxpayers Union, a nonpartisan citizen group founded in 1969 to work for lower taxes, limited government and economic freedom at all levels.

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