Slick politics: big oil fights to keep tax breaks and retorts opposing oil subsidies is “un-American”.

 

Today the CEOs of big oil companies came to Washington to try to defend the indefensible: $4 billion in tax breaks each year taken out of the taxpayers’ pockets. That would be you that they are taking it from. With Democrats fighting to end those subsidies once and for all, executives from the top 5 oil companies tried to claim they paid their fair share in taxes, which is nonsense. Of course, Democrats on the Finance Committee of the Senate today were having none of it.

Mr. Watson: The oil and gas industry pay their fair share of taxes.

Other Oil CEO: We pay our full share.

Rockefeller: In the case of ExxonMobil, your effective Federal tax rate is 3% lower than the Federal tax rate of the average individual. I think you’re out of touch: deeply, profoundly out of touch.

The truth is that the oil companies don’t even come close to paying their fair share. Over the last three years, ExxonMobil had an effective tax rate of 17.6%. That’s 3% less than what the average American pays in income taxes.

So if you are a middle class American, you are paying a higher tax rate than the richest company in the world. Does that sound fair to you?

Senator Chuck Schumer also drilled the Conoco Phillips CEO about his company’s statement that opposing the oil subsidies was “un-American”.

Schumer: Do you think that anyone advocating these subsidies is un-American?

Conoco Phillips CEO: That’s a very important statement. Can I take a moment to respond to that?

Schumer: Do you apologize for that?… I know your view on the issue. Do you consider it un-American to have a different view? Yes or no?

Conoco Phillips CEO: Senator, I believe that the proposal on the table for consideration is going to have a very adverse impact with respect to energy policy.

Get a load of these guys: so not letting big oil companies skip out on paying their taxes is un-American. I guess in their version of America, where they buy our politicians to do their bidding, yeah, then it would be un-American. Today it wasn’t the first time around the block for these big oil guys. The big oil executives faced a similar panel back in 2005. Now at that time Senator Ron Wyden asked the executives if they agreed with President Bush, who said oil companies do not need incentives when oil prices are so high. And back then it was just at $55 per barrel. The oil executives replied that they did not need incentives but access. So they agreed: no need for incentives.

Wyden played that 2005 clip for them today and then hit them with this:

Wyden: If your companies did not need incentives to drill for oil at $55/barrel, how in the world could you need incentives when oil is at $100/barrel?

James Mulva, Conoco Phillips Chairman & CEO: Our costs go up, our taxes go up….

That’s a joke. Their costs are nearly identical to what they were back then. And their taxes have not gone up one dime; in fact, their effective tax rate has gone way down. Do you know what has gone up? What you pay at the gas pump and the incredible profits these oil companies make.

So where do they get the nerve? Look, they’re sitting there and telling the Senators anything that they like. They were cocky today. They were telling them that they were not going to back down on anything. Why? Because they figure that they already bought Congress. You want me to show you how?

Since 1998, big oil spent $1.1 billion on lobbying. Last year alone they spent $146 million. So the Senators can say all they like, but they know that there’s nothing that’s going to go past the House because in the House they bought all the Republicans. Do you know how much they paid the Republicans last year?

They paid them $21.8 million in direct campaign contributions. So that’s why they get to sit up there and be the welfare queens that they are and take all of our money and then they laugh at us. These guys are the worse at not believing in the free market. All those conservatives talk about the free market. Nonsense. All they do is leech off of us.

Now let’s bring in Senator Claire McCaskill from Missouri, co-sponsor of the bill to roll back the big oil subsidies. Please tell me about your bill, how much does it take away in oil subsidies, and do you think it has a chance of passing.

McCaskill: We have tried to do the simplist bill possible by limiting it to the five biggest oil companies. These are the same five oil companies that made a profit of over $35 billion just in the last three months. So the fact that we’re limiting it to the big guys and not going after the small independent producers. And secondly, all of this money is going to go towards the deficit. What I can’t imagine is that all these guys around here talking about the deficit and the debt, and they are not willing to step up and take away these tax goodies from the wealthiest and the most profitable corporations in the history of the world.

“Close Big Oil Tax Loopholes Act”: The Menendez–McCaskill–Brown Plan cuts $21 billion in tax breaks over 10 years; it target the top 5 oil companies.

Senator McCaskill, we know that when you go to pass it, the Republicans are just going to fillibuster and you have two Democrats who are on their side, Mary Landrieu and Mark Begich, and you know that in the House, the Republicans totally control it, they just voted in unison against cutting these subsidies because their bosses are the big oil companies, there is no question about that.

But when you go into negotiations about what to cut next because that’s coming next, is it possible that Democrats can say, and will they say, that we are not going to do any cuts until you agree to these cuts that 74% of the American people agree to and this is the first set of cuts that we have to have, otherwise no deal on any cuts?

McCaskill: I think we are going to be in a very strong negotiating position because if we do not have the political will to cut these subsidies to big oil, how are we going to find the political will to cut the subsidies of all the other parts of our economic picture right now. As you said, we are not talking about a free market, we are talking about subsidizing a lot of big corporations in a lot of different ways: all of those tax goodies that are in the tax code got there via lobbyists. Really, we can lower taxes and have more revenue if we were to focus on the people that didn’t have lobbyists and take all those goodies away.

So if these guys can’t go for this very reasonable approach to reduce the tax subsidies to corporations, I do not know how we can take them seriously on any of the deficit reduction.

Senator, I want to show you a clip from one of the welfare queens that was in the Senate today, that CEO for ExxonMobil, Rex Tillerson, he had the nerve to threaten us. Here’s the video clip.

Tillerson: If you give me a different tax burden than what my competitor has, then I don’t get to develop that lease. Since the U.S. is not attractive, I am going to take my capital and go somewhere else.

And he wasn’t the only one. There were two CEOs who said that they would leave the U.S. I would say, good, God Bless, go to Somalia, see how it would treat you. And in 2009 they actually paid $15 billion in taxes to other countries and none to us. How do you take that threat from a guy like that.

McCaskill: I think it’s frankly a little nervy. The customers of these oil companies that are in this country are paying very high prices right now. The people I represent are hurting because of gas prices. And these guys have been wildly profitable. The notion that they have to get subsidies from the United States taxpayer or they are going to leave our shores is un-American. That is un-American.

And by the way, there are plenty of other companies in the world that do drilling, and do you know how much profit they got just in 2010? The top five oil companies alone got $74 billion in profits. So for them to say that they will take their business elsewhere is a joke. So it’s one thing to bring them up before the Senate Finance Committee, and it has brought this issue to light, and it was a great maneuver to do that so that the American people can get educated on that, but again I want to focus on what’s next. Is there a will within the caucus of the Senate for the Democrats to say we do not have any deal on cutting spending until you cut these subsidies.

McCaskill: I think what you are going to see is that we are going to bring the bill to the floor rather quickly and I am optimistic that there are still a few moderates left in the Republican Party that want to be consistent: you can’t say that we want to cut subsidies in our budget to help our deficit but we won’t touch the ones to big oil. And I think that this is going to be a very uncomfortable vote for many of the Republican Senators. So I am hopeful that we may get a few of them and that we may get enough votes to pass it. And if not, we will figure out the next best strategy to leverage this and get it passed. I think it is very important to stay on this one until we get it done.

Senator McCaskill, thank you for joining me tonight. Now joining me is John Hofmeister, the former President of Shell Oil, and he’s the founder of the Citizens for Affordable Energy and author of, “Why We Hate the Oil Companies: Straight Talk from an Energy Insider”. You were one of these guys in 2005 who answered that you didn’t need these subsidies, isn’t that correct?

Yes, that’s correct, Cenk.

As Senator Wyden pointed out today, we didn’t need these subsidies when oil was selling for $55 per barrel, is there any rational argument that these oil companies would need subsidies to promote drilling when oil is at $100 per barrel?

Hofmeister: What was happening today was show time, political theatre. What the companies are objecting to is being singled out. There is a deal out there to be made. And why the Senate, the House, the White House, and the industry won’t come together to figure out some deal. The U.S. needs more oil; we all know that. There’s oil to be had. The government needs more money. There’s money in oil. The American people need lower prices, where more oil will lower prices. There’s a deal here, and when the Democrats set out to punish just five companies, of course they are going to get pushed back. I would have pushed back. It is not the money, it is not the subsidies, it is the process. So how do we make a deal here that everybody could win.

John, I agree with you in 2005 when you said that you didn’t need the subsidies, and I think that you are saying that today. When you say that they are singling out these top five, you lose me entirely and I will tell you why. It is not that you are wrong about that. But if you say let us sit down and cut these oil subsidies, I would do that deal immediately. But the reason we cannot do that is because these politicians are bought. The entire Republican Party is in the tank for these guys. They got $21.8 million from these oil companies. Their votes have been bought literally by these oil companies. If I could get the Republicans to cut all of these oil companies, I would do that in a second. Isn’t that the problem? These guys won’t make a deal because their boss is the oil companies.

Hofmeister: The problem is 50% Republican and 50% Democratic. Both parties.

No way.

Hofmeister: Both parties. The Democrats have refused to drill. They have had the Senate for five years. We haven’t had a single energy plan in five years. 

John, let’s set the record straight. Are there Democrats in the tank for these guys? Absolutely. Mary Landrieu has gotten $794,844 in her career from Big Oil. And now she says this is a gimmick going after the oil subsidies. Mark Begich from Alaska has gotten $139,805 from these big oil companies, and he says the same thing, oh, poor oil companies; we need to give them more of our tax money. So do I believe in these Democrats? Hell, no. These Democrats are just as corrupt as the Republicans. But there are just two Democrats, whereas it’s the entire Republican party. You’ve got to see that.

Hofmeister: I get this question all the time at town hall meetings across the country. Why do we have legalized corruption in Washington D.C.? Why are we paying any money to a politician, anybody? If they are in for public service, why would any politician want money? I think the whole corrupt system of pay to play or whatever you call it, where you use all this money, Republicans and Democrats, is just legalized corruption. And it should go away.

John, I couldn’t agree more with that. But assume you are in the Senate and you got this bill in front of you. I would vote for it in a second. Is it the best bill? I would take away all of the oil subsidies. They are all totally indefensible. I would love to do clean elections. That is my number one issue. I totally agree with you there. But you got this bill in front of you. Who would you rather have this $21 billion. The oil companies who are making all of these profits, or the American people?

Hofmeister: I don’t think that is the solution. Oil companies need more money to plough back in to make more oil, the American government needs more money, and everybody needs more money. We get more money by producing more oil.  By producing more oil, we get more money, and everybody comes out ahead.  The consumers get lower prices, the government gets more taxes, and the oil companies get more money to make more oil.

John, that’s nonsense. They made $74 billion in profits last year. And just this quarter they made over $30 billion in profits. So it’s not like they are not making profits; their costs are incredibly low in comparison to the $100 per barrel of oil.  So they have all of the incentive in the world in the free market to drill, baby, drill.  And they can drill all over the place. And they can make that profit. Why should we not tax them at a reasonable rate. Right now they are paying less than the average middle class guy in the street. Why is a plumber paying higher than ExxonMobil. That is entirely unjustifiable.

Hofmeister: This is a 90 year old problem. These tax loophole subsidies go back 90 years. This is not a new problem. Why hasn’t it been settled before now? Why can’t these companies get permits? Why can’t they get leases? Why does the White House flip flop on whether they can drill or not?

They have all the permits and leases in the world. They got all these leases that they are not even using. John, these are all excuses. Is it a 90 year old problem, I absolutely agree. So let’s fix it today. Let’s vote yes on this bill. And then let’s vote yes on the next bill to get rid of the rest of the subsidies. If you are not going to do that, you are saying you are continuing the problem.

Hofmeister: Here is what I said in the House of Representatives two months ago. 3 million more barrels, 3 million more jobs, $20 billion to the Federal government, not $4 billion, $20 billion. That’s a whole lot more. All it would take is cooperation between the White House and the parties, and we could get it done.

I would love to get it done, but there is no cooperation because every time you go to do it, the Republicans say, hell, no, we got to give that extra $4 billion to the oil companies. So I don’t see where you see that cooperation. I see a bunch of bought politicians who are making certain that the richest people in the world and the richest companies in the world pay less taxes than the average American, and I find that repulsive, and I find these guys to be the biggest welfare queens in the country.

Hofmeister: And that’s the reason I started Citizens for Affordable Energy, a grassroots organization, not Republican, not Democratic, we take no money from any energy company, we are about fixing this problem for America’s future.

All right, I hear you on that, brother. John Hofmeister, former CEO of Shell Oil Company. Thank you for joining us tonight. We do appreciate it.

Thank you.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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