In this political and economic climate, a tax hike proposal of any kind is welcomed with the same enthusiasm as a bout of food poisoning. If a proposed tax hike on the oil industry is decried as unfair, it would seem no new tax, or shifting of the tax burden, is likely to be seen in the next few years.
Consider the reaction by some conservatives to a bill under consideration in Congress to quadruple a tax on the oil industry that would raise $11 billion over 10 years to pay for oil spill cleanups. The tax would increase from 8 cents per every barrel produced or imported to 32 cents per barrel. In a recent press conference in Bangor, Phil Kerpen of the conservative Americans for Prosperity group said, “Oil companies are convenient scapegoats because people do not like oil companies.”
Oil companies, like tobacco companies, are indeed convenient targets for tax hikes because the public does not sympathize with their plight, especially after the BP spill. But they also are a logical and sensible source of increased government revenue because they have earned phenomenal profits in recent years. Oil companies also produce a fuel whose consumption has some undesirable consequences relating to U.S. foreign policy and climate change.
The cost borne by middle-income taxpayers for the safe and consistent operation of oil companies also must be considered. The U.S. military ensures safe passage of oil in hostile sea lanes. The same is true for railroad and over-the-road transportation of the product, with local and state law enforcement ensuring safe passage. And roads and bridges on which oil tank trucks roll are repaired on the middle-income taxpayer’s dime.
Oil companies will pass the cost of the tax on to consumers, Mr. Kerpen argued, or the loss in profits will hurt the many retirement funds that are invested in oil stocks. The profit argument is risky for Mr. Kerpen to make, given that in 2009, Exxon Mobil and Chevron topped the Fortune 500 list of corporate earnings, raking in $45.2 billion and $23.9 billion in net profits, respectively.
And then there is the issue of the cleanup fund, which is front and center in any discussion of oil industry tax policy after the BP disaster. Progressive commentator Jim Hightower turns the question of whether the oil industry is being scapegoated by tax policy on its head. He notes that in its development of the Deepwater Horizon well, BP rented a drilling rig from Transocean Corp., and took advantage of a tax break to write off 70 percent of the rental payments, “a savings of $225,000 a day for BP,” Mr. Hightower wrote.
A politically palatable way to sell a tax increase on oil companies could be to dedicate some of the revenue to weatherization programs. Every oil tax dollar spent reducing the amount of oil burned this winter to heat homes and buildings will help middle-income taxpayers. The oil companies should be able to pick up the tab for that much.