A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.
Snapshot for May 23, 2001.
Corporate welfare for the oil industry
Thirty years ago, Rep. Morris K. Udall of Arizona wrote:
In 1965 the 20 largest oil companies in the United States had aggregate profits of nearly $6 billion. Taking advantage of special preferences in our tax laws, they paid income taxes representing only 6.3% of these profits — the same rate paid by a married taxpayer with two children earning just $4,900 — and 41.7% less than the rate paid by most U.S. corporations. Shocking examples like these reflect no dishonesty on the part of oil companies; they reflect a failure of Congress to face up to the glaring inequities in our income tax system.
Rep. Udall was talking about a tax loophole that is now 75 years old: the oil depletion allowance. Since then, a second, even larger loophole has been added — the enhanced recovery tax credit. The rapid increase in the value of these subsidies since 1998 (see chart) has not seemed to avert what the Bush Administration is calling an energy crisis.
These subsidies make possible investments that would not otherwise be profitable. They also make some wealthy people richer than they would otherwise be. The Congressional Budget Office estimates that elimination of such provisions would free up about $17 billion over the next 10 years.
Sources: “Federal Tax Expenditures” in Analytical Perspectives, Federal Budget of the U.S. Government, various years; Budget Options: Paying Down the Debt, Spending Options, Revenue Options, Congressional Budget Office, February 2001; Preparing for Peace, “Oil Depletion Forever,” Rep. Morris K. Udall, Volume VIII, No. 6, July 11, 1969.
This week’s Snapshot by EPI economist Max B. Sawicky.
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