The Senate’s energy bill (H.R. 6, The Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007 ) hits the major domestic oil companies with a $13.5 billion taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. hike over ten years by denying them the domestic manufacturing credit—known as the section 199—which is otherwise available to all domestic manufacturers.
The ostensible purpose of this exceptionally bad piece of tax policy is to punish the “evil” oil companies for their record profits over the past few years. The tax hike will do nothing to lower domestic gasoline prices for consumers. Indeed, since companies are not likely to pass the cost of the tax along to consumers because of competitive pressures, the pinch will most likely be felt by workers in the domestic petroleum industry.
The question is, how much?
The Joint Committee on Taxation estimates that the repeal of 199 will raise $262 million in 2008 and $3.46 billion over the first five years. According to the Survey of Current Business, there are 109,000 full-time workers engaged in petroleum manufacturing and 134,000 engaged in oil and gas extraction.
If we assume that the repeal of 199 impacts all $243,000 of these employees directly (including extraction companies who may not benefit from 199), the first-year cost to these workers is $1,078 while the five-year cost is more than $14,000.
However, if we assume that only the 109,000 workers in petroleum manufacturing bear the whole burden of the new tax, then the first-year cost to them is $2,404 and the five-year cost is $31,761. This is not a victimless tax.
|
Full-Time Equivalents |
2006 |
|
Oil & Gas Extraction |
134,000 |
|
Petroleum and coal manufacturing |
109,000 |
|
2008 |
Five-Year 2008-2012 |
|
|
Tax Cost of 199 Repeal for Oil Companies |
$262 Million |
$ 3.46 Billion |
|
Tax per employee all oil, gas, petroleum |
$1,078 |
$14,247 |
|
Tax per employee petroleum manufacturing |
$2,404 |
$31,761 |
There seems to be a false assumption that U.S. oil companies do not pay their fair share of taxes. However, data from the Energy Information Administration within the Department of Energy shows this presumption to be clearly false.
In 2005, domestic oil companies paid $39 billion in direct taxes, including $26 billion in federal income taxes. Add to this some $47 billion in excise taxes collected and $39 billion in foreign income taxes paid, brings the total taxes paid or remitted by domestic oil companies to $125 billion. This equals two-thirds of their consolidated pretax income for 2005.
|
Taxes Paid By US Domestic Oil Companies 2005 |
In Billions |
|
Federal Corporate Income Taxes |
$26.0 |
|
State & Local Corporate Income Taxes |
$3.6 |
|
Production Taxes |
$4.9 |
|
Sales, Use, and Property Taxes |
$2.7 |
|
Payroll Taxes |
$1.3 |
|
Other Taxes |
$0.5 |
|
Total Direct Taxes Paid |
$39.0 |
|
Excise Taxes Collected |
$47.2 |
|
Foreign Taxes Paid |
$39.2 |
|
Total All Taxes Paid or Collected |
$125.4 |