Supermajor Oil Companies and the Deficit
Thursday, May 12, 2011
Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Dan Berman, POLITICO Pro's energy editor, and Robert Menendez, U.S. Senator from New Jersey (D), talked about subsidies for the five largest oil companies as a Senate Finance Committee hearing on the issue progresses in Washington D.C.
Dan Berman said Thursday morning's Senate Finance Committee hearing about ending annual two billion dollar subsidies for the top five oil companies was intended to be something of a shaming session by Democratic Senators.
Democrats are hoping for the YouTube moment, you get one of the executives or one of the Republican Senators saying something that looks bad on video and that's the story for awhile.
At a time when gas and oil prices are at record highs, big oil companies are raking in billions in profits, while simultaneously benefiting from tax subsidies. Exxon alone saw a 69 percent rise in quarterly profits.
Will eliminating subsidies will make gas pumps pricier?
The oil executives counter that removing the tax subsidies will hamper America's competitiveness in a sector in which they are up against powerful foreign companies, like that of Saudi Arabia. At the hearing, they also threatened that if the subsidies end, drilling in the U.S. will become cost prohibitive and they will be forced to move overseas and lay off American workers. Berman said Democrats aren't buying it.
Democrats will say that's hogwash and this is really a small tax incentive that's easily absorbed by the oil companies.
Democratic Robert Menendez from New Jersey is one of the Senators pushing the proposal to help close the federal deficit. He says it's ironic the oil executives are "pleading poverty" when they're tallying up big profits.
It's just hard to understand when the medium income for the average American is about $50 thousand, that the big five, that will make $125 billion in profits this year need an additional two billion a year for the next ten years from the taxpayers of this country in order to be profitable and in order to produce oil.
Citing a study by the Congressional Research Service, Menendez rejected the assertion that gas prices will go up even higher if the tax subsidies are erased, and said that some of the subsidies the oil companies benefit from are absurd, for example a manufacturing credit.
Why don't we just end all tax breaks?
The whole idea of tax subsidies is to make incentives for the private sector to pursue national goals, Menendez said, but they don't need to last forever. If we want to reduce our dependence on oil, a better use of the tax code, he says, would be to provide breaks for renewable energy sources.
In wind, solar, biomass, in fueling our car fleets in different ways. But it doesn't mean they have to be perpetual. And when they no longer serve the national interest that doesn't mean that they have to continue to live forever, and in this case they are certainly not needed for incentivizing the oil companies to pursue that which they are deriving in the marketplace rather robustly.
Democrats call for shared sacrifice
At a time when all Americans are being asked to give up services to reduce the deficit, Menendez said there is no reason big tax companies who are making a profit at the expense of high gas and oil prices should be excluded.
It's time to close the loopholes, it's time to close the deductions. It's time for Big Oil, the top five companies, to be part of the shared sacrifice of helping reduce the deficit.