Congressman Tim Bishop has unveiled new legislation targeting the billions in taxpayer subsidies given to Big Oil each year, continuing his longstanding campaign against the corporate welfare lavished on giant oil conglomerates despite high gas prices and record profits. Removing this unneeded subsidy would reduce the deficit by $9.2 billion over 10 years, according to the Congressional Joint Committee on Taxation.
Bishop's updated version of the Big Oil Welfare Repeal Act (H.R. 1426) would eliminate the "Section 199" deduction for the "major integrated oil companies:" BP, Chevron Corp, ConocoPhillips, ExxonMobil Corp, and the Royal Dutch Shell Group. ExxonMobil and Chevron earned the highest and second-highest profits, respectively, of all U.S. corporations in 2012. In total, these five companies recorded a total of $118 billion in profits in 2012, following their record profit of $137 billion in 2011.
"Americans are still paying twice for gas: once at the pump and once on tax day--it's an outrage," Bishop said. "Big Oil already has every incentive to drill, and increasing the federal deficit to pad their sky-high profits is 'Exhibit A' in wasteful government spending."
A repeal of the subsidy is included in Fiscal Year 2014 Budget introduced by President Obama yesterday and has also been targeted for elimination by the Bowles-Simpson Commission on Deficit Reduction. Bishop attempted to force a vote on H.R. 1426 yesterday during consideration on the House Floor of legislation related to environmental regulation of hydropower plants, but his procedural action failed in the face of unanimous Republican opposition.
"If this wasteful subsidy for the largest oil companies was proposed today, it would be dismissed immediately. Why let it continue one more day?" said Bishop. "These subsidies must not continue while programs that grow our economy and help average Americans make ends meet are facing deep cuts."
The "Section 199" subsidy allows companies to deduct from their tax liability six percent of the income they derive each year from oil and gas extracted in the United States and its shores. Bishop said that the domestic manufacturing deduction for oil and gas distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. This market distortion is also detrimental to long-term energy security and is also inconsistent with goals of creating a clean energy economy, reducing America's reliance on oil, and eliminating pollution.
"These corporate gifts are a remnant of past policies which tie us to dirty fossil fuels for our future," said Adrienne Esposito, Executive Director, Citizens Campaign for the Environment. "The time has come for America to invest in the clean, safe, renewable energy resources to provide a sustainable future rather than providing handouts to dirty, dwindling and unsustainable fossil fuels. Citizens Campaign for the Environment commends Congressman Bishop for working to end corporate welfare for big oil."
Repealing the oil industry's tax subsidies will not impact gas prices for American consumers. Oil is traded on a global market and each barrel of crude is sold for the same price, regardless of how much its production was subsidized. Producers receiving tax subsidies pass on that benefit to their shareholders, not to consumers.
While continuing to enjoy the "Section 199" subsidy, the largest five oil producers have directed the lion's share of their profits into dividends and stock buy-backs, with the five largest spending $42 billion in 2012--one-third of their profits--repurchasing their stock. Among these companies, less than 10 percent of profits are reinvested into exploration of new oil deposits each year.