Inside the Beltway, the slogan “eliminate subsidies for oil companies” has been frequently used lately, although none of the officials repeating variations of it point to any payouts that oil companies actually receive from the federal government. President Obama brought the so-called subsidies up in his State of the Union Address.
On January 31,, 2011, The New York Times proclaimed, “Mr. Obama’s proposal rekindles a long-running debate over federal subsidies for energy of all kinds, including petroleum, coal, hydropower, wind, solar and biofuels. The New York Times equated “such subsidies” with “incentives, tax credits, preferences or loan guarantees. . .” Outside of The New York Times editorial offices, most people can tell the difference between money that they earn through their labor and subsidies that they receive from the federal government for no apparent reason. Moreover, they are generally aware that taxes paid on income is what pays for those subsidies.
Meanwhile, back inside the Beltway, U.S. Representative Earl Blumenauer, (D-Oregon) introduced the End Big Oil Tax Subsidies Act, which failed in Congress. Nevertheless, Rep. Blumenhauer’s proposal also cited no examples of federal grants extended to big oil.
Nonetheless, a few weeks prior to the scheduled vote, President Obama sent out a letter to the congressional leaders entitled, “Letter from the President to Congressional Leadership Regarding Oil Subsidies.”
“I am writing to urge you to take immediate action to eliminate unwarranted tax breaks for the oil and gas industry,” he wrote. “Our outdated tax laws currently provide the oil and gas industry more than $4 billion per year in these subsidies. . .
“I was heartened that Speaker Boehner yesterday expressed openness to eliminating these tax subsidies for the oil and gas industry. . .”
The problem was a serious confusion of the terms subsidies and tax breaks. Meanwhile, media reports about “ending subsidies for oil companies” still appear regularly.
First, there are distinct differences economically as well as linguistically between a subsidy and a tax credit. Second, U.S. chartered oil companies DO NOT RECEIVE subsidies, they receive tax deductions.
Third, the energy sectors that receive actual subsidies are green industries focused on renewable sources of energy: wind, biofuels, solar, nuclear, and even clean natural gas.
Fourth, the only so-called oil subsidy involves research and development within the Department of Energy, not money handed to oil companies. Oil companies in the private sector receive tax deductions and tax credits. There are distinct differences between a subsidies, tax credits and deductions.
Subsidies, as defined by Webster, are: “a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public.” They are a redistribution of money. Governments do take tax money and give it to people, places and things that they deem worthy of the largesse.
With tax credits and tax deductions, oil companies are allowed to keep their own money earned from providing a good or service to customers. IF these tax credits are revoked, then there will in effect be a tax INCREASE, meaning the federal government will take MORE money from the oil companies, a cost which will be passed on to their customers.
On the CNN Money website, an article entitled, “End Big Oil’s Tax Breaks Now,” might reveal the real goal of the campaign against the oil industry. It states, “The D.C. debate over fossil fuel handouts was, of course, framed within a short-term political prism. . . but ending oil and gas subsidies should be about something much larger: creating a marketplace in which renewable-energy companies can compete fairly with fossil-fuel incumbents. For too long we’ve heard petroleum advocates say that solar, wind, and biofuel are failed experiments. They’ve had their chance.” In the end, the article states, “the renewable-energy industry’s best long-term play is to support the elimination of all federal energy handouts.”