Eliminate Oil Industry Subsidies: Reduce the Deficit
One effective way to put the nation's financial house in order is to eliminate unnecessary subsidies for the Oil industry.
The Congressional Research Service reports that since 1968, the six largest companies in the industry have received a staggering $190 billion. This is all lost revenue to the United States Treasury. Mature industries do not warrant continued tax support, especially in light of the very modest incentives provided to the clean energy sector. Join with us in calling for Congress to rearrange its priorities and work to reduce the deficit while directing spending to more productive uses.
For more information about ASBC's work on oil subsides, see:
Dear Senator Baucus:
As business leaders representing small, medium and large businesses, we recognize that when it comes to balancing our own books, we must often rearrange priorities and direct spending to its most productive uses. Congress should do no less as it grapples with soaring deficits and an economy still reeling from the impacts of near collapse.
However, our members are concerned about the recent budget discussions and legislation in Congress that are identifying subsidies to small businesses as “excess” while maintaining significant subsidies to the oil industry. The American Sustainable Business Council is concerned that while many countries, including some of our fiercest competitors are investing in the future, the U.S. remains wedded to economic priorities that are tethered to the past. The most egregious of these of course are tax benefits and other subsidies to the oil and gas industry some of which have been part of the tax code since 1916. The non-partisan Congressional Research Service reports that since 1968, just six of the many subsidies to the oil industry have amounted to a staggering $190 billion in revenue loss to the United States Treasury. For example, the percentage depletion allowance has sacrificed over $111 billion in potential revenue, even as it has allowed some oil companies to actually deduct more than it cost to acquire and develop an oil reserve. These are the kinds of revenue losses that cannot be sustained when these same companies are reporting record billions in profits.
And while it has been suggested that oil and gas companies need these breaks to develop new reserves, which theoretically would be used to increase gasoline availability and presumably reduce the price at the pump, the facts don’t add up. According to the Energy Information Administration, it costs $15 a barrel to produce oil in some fields in the United States. The price of a barrel of oil, which is set on the world market, is hovering over $100 a barrel today, regardless of whether or not it costs $2 to produce that barrel in the Middle East or $15 to produce it in the United States. Instead, according to Citizens for Tax Justice, the big 5 oil companies increasingly are redirecting those billions into dividends and stock purchases. Furthermore much of the increase in the price of gasoline is due to speculation. Removing billions in tax breaks isn’t going to change that.
Yet we are very concerned that in the name of budget austerity, benefits to small business, unlike oil companies, is on the chopping block. The House of Representatives recently passed legislation that would cut tax breaks to small business for health care. Small business, the engine of the economy, should not be hit while large oil companies are reaping in billions. This is especially true since the emissions related to oil are primary sources of smog, which leads to premature deaths and an increase in hospital visits according to the American Lung Association. All Americans foot the bill for those related increased health care costs, including American businesses.
We support efforts to reign in the budget and cut deficits. But Congress needs to examine what makes sense for all Americans, not just a few. We urge you in the coming days as you have the opportunity to scrutinize the federal budget, that you do so with the
foresight to take America forward.
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