Do Oil Companies Pay Their Fair Share in Taxes?

March 14, 2012

There has been a lot of debate recently about oil and gas companies and the tax treatment they get in the United States. President Obama has on multiple occasions proposed increasing taxes on oil companies specifically, in addition to endorsing general corporate tax changes that would include oil companies.

Today's Wall Street Journal (subscription required) provides some valuable context on what oil and gas companies actually pay in taxes:

The federal Energy Information Administration reports that the industry paid some $35.7 billion in corporate income taxes in 2009, the latest year for which data are available...That figure also doesn't count excise taxes, state taxes and rents, royalties, fees and bonus payments. All told, the government rakes in $86 million from oil and gas every day—far more than from any other business.

Not paying their "fair share"? Here's a staggering fact: The Tax Foundation estimates that, between 1981 and 2008, oil and gas companies sent more dollars to Washington and the state capitols than they earned in profits for shareholders.

The White House has also called certain tax preferences enjoyed by oil companies "subsidies," but the Journal editorial board argues that such a label is misleading:

As for the "subsidies" that Mr. Obama says the oil industry receives, these aren't direct cash handouts like those that go to the green lobby. They're deductions from taxes that cover the cost of doing business and earning income to tax in the first place. Most of them are available to other manufacturers.

When it comes to many provisions in the federal tax code, the difference between a tax break, a tax loophole, and a tax subsidy can be in the eye of the beholder. For more background see Tax Foundation president Scott Hodge's study "Who Benefits from Corporate 'Loopholes'?"

Subscribe to the Tax Foundation Newsletter

Follow Us

About the Tax Policy Blog

Subscribe to Tax Foundation - Tax Foundation's Tax Policy Blog The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.

Monthly Archive