In case you haven’t heard, Big Oil is pretty much the worst
What would happen if you paid less than half of the taxes you owed to the federal government, then wrote Uncle Sam a note saying you’d get him the rest at some undisclosed future time? If you’re an ordinary taxpayer, you would be in pretty big trouble.
If you are one of the 20 largest oil and gas companies in the United States, however, you get a pat on the back and perhaps a new tax code loophole for next time.
Many large companies and industries excel at avoiding federal income taxes (at least in the United States), some to a jaw-dropping degree. However, the oil and gas companies are by and large the richest of these tax dodgers. Though they generally pay the most in federal income taxes due to their huge profits, it is what they should be paying that frustrates the average American citizen.
Brace yourself for the numbers
Okay, we’ll get straight to it. Taxpayers for Common Sense recently released the results of a study that analyzed the tax filings of the 20 largest U.S.-based oil and gas companies, and it isn’t pretty.
According to the study, Big Oil collected $133.3 billion in pre-tax income from 2009 to 2013 and reported total federal income taxes owed of $32.1 billion. That seems like a lot of money until you realize that the 24% tax rate these dinosaur-sucking giants are accountable for is probably about what you pay, and is far less than the statutory federal income tax rate of 35% paid by the rare civic-minded company.
But wait, it gets worse. The oil and gas corporations – the biggest of which, accounting for 84% of the income of the 20 companies in the study, are ExxonMobil, ConocoPhillips, Occidental, and Chevron – actually paid only $15.6 billion in federal taxes over the five-year period. The remainder was deferred.
This adds up to a paltry 11.7% current tax rate. Sure, those companies in theory will have to pay that deferred $16.5 billion at some point, but does anyone really believe that will happen? Certainly not in the current political climate.
How else could we spend $31 billion?
For those keeping track at home, if oil and gas companies were held fully responsible for the statutory tax rate an extra $31 billion would have been injected into the American economy in the last five years.
Instead, it was effectively injected into the ground in the form of more oil and gas exploration and drilling that will become increasingly desperate as the glory years of Big Oil begin to slip away.
I can think of quite a few ways to spend the $31 billion that the United States is owed by these oil and gas companies. As an electric vehicle reporter for Torque News, I’ll first point out that $31 billion could fund the installation of 206,667 multi-vehicle 120-kW Tesla Supercharger stations capable of charging a Model S to 170 miles of range in a half hour.
For you hydrogen fuel cell advocates out there (misguided though some of you may be) $31 billion could install anywhere from 62,000 to 124,000 hydrogen refueling stations. Heck, $31 billion devoted to battery research could produce miraculous developments in cell technology that would render gasoline vehicles obsolete.
But just think of all the other sectors that need attention and are at the mercy of tightening budgets: education, infrastructure, public transit, the military...
Just checking to see if you haven’t already abandoned this article to grab your torch and pitchfork.
Put a stop to the madness, please
I do not claim to be an expert on taxes or the oil and gas industry by any means. I am very good, however, at pointing out the obvious. And in this case, it is obvious that the oil and gas industry is receiving help it does not need from the federal government.
The five biggest oil companies in the world (three of which are based in the States: Chevron, ConocoPhillips, and ExxonMobil – the other two are BP and Royal Dutch Shell) brought in $48.6 billion in profits through just the first half of the year. These folks are doing just fine for themselves without tax loopholes, thanks.
Speaking of loopholes, the group of U.S.-based companies in the study were far more generous to foreign governments than they were to their own. The income tax rate paid to foreign governments totaled 46.2% of foreign pre-tax income, and since other governments don’t offer loony things like deferments the oil and gas companies actually paid 99% of the $254.2 billion they owed to foreign governments from 2009-2013.
How does Big Oil pull it off here in the United States? Well, here is a big hint: the five biggest oil and gas companies have spent $23 million so far this year just to lobby politicians to continue the current arrangement.
The oil and gas industry ought to be held accountable for its business practices. There is no sane reason to continue to offer lavish incentives to the companies that, if given the opportunity, would pump the atmosphere full of carbon dioxide until the day their executives died of heat stroke. Regardless of what the federal government did with the money if it enforced proper tax rates, that money would do a lot more good out of the hands of Big Oil.