Yesterday, the governor of Puerto Rico announced that his government’s $72 billion of debts are not payable, in advance of $1.92 billion in debt service payments due on Wednesday. This announcement follows over a year...
- Oil Industry Taxes: A Cash Cow For Government
Oil Industry Taxes: A Cash Cow For Government
Special Report No. 183
• Data from the Energy Information Administration show that governments in the U.S. and abroad are hugely dependent upon the direct and indirect taxes paid by the largest consolidated oil companies, and that between 1981 and 2008 these tax payments exceeded corporate profits by 40 percent.
• Between 1981 and 2008, the oil industry paid more than $388 billion to the federal and state governments in corporate income taxes, but they paid almost twice that amount, $683 billion, to foreign governments.
• Profits and income tax payments mirror the price of oil. In 1998 when the price was low, the industry paid just $733 million in federal and state income taxes. In 2006, with the real price of oil averaging over $63 per barrel, the industry paid a record $37 billion in corporate income taxes.
• Excise tax collections have grown steadily. Between 1981 and 2008, $1.1 trillion was collected in excise and sales taxes on petroleum products. In 1999 governments collected $59 billion, more than twice the industry's net profits that year.
• In severance, property and so-called windfall profit taxes, the industry paid more than $472 billion between 1981 and 2008.
The tragic impact of the British Petroleum oil spill on the five U.S. states that border the Gulf of Mexico has prompted calls for higher taxes on U.S.-based oil and gas companies even though the industry's tax remittances already exceed its corporate profits.
Some legislators would prefer an economy-wide tax on fossil fuel energy, either a carbon tax or cap-and-trade system. Others prefer a targeted approach that aims to repeal any tax provision that benefits the oil and gas industry. Champions of this approach even include on their hit lists tax provisions that benefit many other industries, in which case they propose withdrawing the benefit just for the oil and gas industry.
A common theme to both approaches is a bald assertion that the oil and gas industry pays little in tax. Despite the hyperbolic rhetoric from some lawmakers and interest groups, the facts do not support a claim that the oil and gas industry in America is under-taxed. Hard data from the Energy Information Administration show that governments in the U.S. (and even those abroad) are hugely dependent upon the direct and indirect taxes paid by the largest consolidated oil companies.
Indeed, since 1981, when the failed windfall profits tax was first enacted, federal, state, and local governments in the U.S. have collected more in taxes from the oil industry than the industry has earned in actual profits for its shareholders. For example, after adjusting for inflation, the combined net earnings (net of taxes and expenses) for the largest petroleum companies between 1981 and 2008 totaled $1.4 trillion. By contrast, the total amount of taxes collected by U.S. governments from the oil companies topped $1.95 trillion, roughly 40 percent more than the industry's combined profits. Tax collections exceeded company profits in 23 of the 27 years surveyed.
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