Based on previous reports from various organizations, Tax Payers for Common Sense being one of them, the oil and gas industries don’t pay their fair share of taxes. They make the argument that because of “special” tax breaks and subsidies, they are far lower than the 35% corporate rate the US law dictates for other large corporations.
The truth is this: Oil companies are paying much higher tax rates globally and the few tax breaks that do exist are far outweighed by the benefit they provide to our nation as a whole.
According to the American Petroleum Institute (API), if we look at a snapshot from 2007 to 2012, the oil and gas industry topped the list with an effective tax rate of nearly 45%. That’s over double the pharmaceuticals industry. An industry that is raking in the cash from a profit perspective. (See my previous article about profits by industry)
So why are oil and gas paying so much more taxes than other industries? Simple, oil and gas companies operate a large portion of their business overseas. That means subjecting themselves to higher taxes on overseas income. And don’t forget oil companies pay state and local taxes as well.
In fact, according to USA Today rankings from 2012, you’ll see that the top two companies paying the most income taxes are ExxonMobil and Chevron!
It really comes down to this. Are there subsidies and tax breaks for oil companies? Yes… the same tax incentives available to every other manufacturing and mining company in the US. These “subsidies” probably aren’t what you think, and as you can see from the fact that their effective global tax rate is roughly 45%, anything they save in the US, is most likely paying for foreign taxes.
And when it’s all said and done, if they did receive special treatment, it would probably be worth it due to the substantial employment and economic growth they provide for the US economy.