Sen. Coburn's Nonsensical Excuse For Preserving Tax Breaks For Big Oil
The Minneapolis Star Tribune takes Sen. Tom Coburn (R-OK) to task for his inconsistent "deficit piety":
Oklahoma Republican Sen. Tom Coburn spoke stirringly about the nation's crushing debt load recently as he urged his fellow U.S. senators to get rid of the ethanol earmark and tariff.
"The days of placing spending programs in the tax code and giving them holy status are over,'' said Coburn, who teamed up with California Democratic Sen. Dianne Feinstein to push through a largely symbolic vote to end ethanol subsidies at the end of this month. [...]
But where was this oil-state senator's deficit piety a month ago when he and other Republican senators led the charge to protect billion-dollar tax breaks for major oil companies? In May, with the industry reaping near-record profits, Coburn was one of 48 mostly GOP senators who voted to keep key oil tax incentives intact.
The oil tax break measure Coburn voted against would have eliminated $21 billion in tax loopholes for the five biggest oil companies and required that the savings be used to reduce the budget deficit. So why did Coburn vote to keep giving tax breaks to huge companies?
The Coburn office's reply to an editorial writer's query was less than satisfying. The senator "would prefer to get rid of all subsidies and move toward a flat tax. That said, not all subsidies are created equal. He wants to highlight the most egregious and make the case for fundamental tax reform."
So why are ethanol tax giveaways more egregious than those for one of the world's most lucrative industries? Again, an unsatisfactory answer: "Because, for better or worse, we have a fossil-fuel-based economy, not a corn-based economy."
"Unsatisfactory" is putting it mildly. The explanation from Coburn's office just doesn't make any sense. If having a "fossil-fuel-based economy" is bad, subsidizing the production and sale of fossil fuels is, pretty much by definition, also bad. So that can't really be the reason Coburn wants to keep the tax breaks. But even if Sen. Coburn thinks it's good that we have a "fossil-fuel-based economy," the tax breaks don't make much sense. See, the oil companies in question are incredibly profitable, as the Center for American Progress has explained:
Between 2001 and 2011, a period marked by gas price volatility, these five companies collectively made more than $900 billion in profits. In 2010, Exxon Mobil finished first in the Fortune 500 list of company profits for the eighth year in a row, with Chevron coming in third and ConocoPhilips 16th. [...]
Ordinarily huge profits should lead to moderately higher tax bills, returning some benefit to the government and to American taxpayers. Not so in the case of Big Oil. During periods of enormous profits, some of these companies had relatively modest federal income tax bills. From 2009 to 2010, Exxon Mobil had an average effective federal income tax rate of 17.6 percent-less than the average American family's rate of 20.4 percent. From 2007 to 2009, Chevron's average effective income tax rate was about the same as an average family's tax rate.
Between high profits, stock buybacks, and low taxes, these companies have done very well over the past decade. Yet these five companies alone receive over $2 billion annually in benefits from tax loopholes, some of which are nearly 100 years old. These programs were put in place at a time when oil companies were "emerging industries" that needed government assistance to create the market and infrastructure vital to domestic production. That's no longer the case.
So, the five big oil companies combine for about $90 billion in profits per year. Does Sen. Coburn really believe we have to keep giving them $2 billion a year in tax breaks, or they'll decide selling oil isn't worth the trouble, taking the entire economy down with them? That they're willing to provide the fossil fuels the economy is based upon for $90 billion in annual profits -- but if that were to drop down to a mere $88 billion a year, they'd just stay in bed and call the whole thing off? Of course not. That's absurd. The explanation that these tax breaks must continue because of the role fossil fuels play in the economy is obviously untrue. Exxon Mobil -- the nation's most profitable company eight years running -- isn't going to close up shop just because its profits take an imperceptible dip.
So what's the real reason Coburn wants to keep giving massively profitable oil companies billions of dollars in tax breaks every year, even as he sermonizes about the perils of deficits? Maybe it has more to do with the importance of fossil-fuel companies to Tom Coburn's campaign coffers than to the economy. Over the course of Coburn's career, the oil & gas industry, led by Koch Industries, has been the third largest source of Coburn's campaign funds.