Big Oil: Obama's Fake Debate
Last year President Obama got on Big Oil over “environmental procedures for oil and gas exploration and development,” in response to the huge oil spill in the Gulf of Mexico. A year later he is on Big Oil’s case again over their “making huge profits and you’re struggling at the pump.” The president jumped their case in his weekly radio address following one of the biggest oil companies', Exxon Mobil, report that its profit rose 69 percent to $10.65 billion during the first three months of the year. Huge profits are different from huge oil spills.
In addition to Obama saying, “these tax giveaways aren’t right” and “we need to end them,” Senate Finance Committee Chairman Max Baucus (D-MT) released a plan to end “billions of dollars in tax breaks for large, multinational oil and gas companies.” Echoing the president’s charge with the headline, “Skyrocketing Gas Prices Necessitate Action to Address Energy Costs,” Baucus called his plan a blueprint for legislation that he intends to craft in the Committee.
Its first big bullet point is, “Repeal tax breaks for the largest oil and gas companies – end tax incentives for the five largest oil and gas companies that announced tens of billions of dollars in first quarter profits this week. This includes the elimination of the section 199 manufacturing deduction, reduction in the foreign tax credit for royalty payments to foreign governments and the imposition of an excise tax on certain Gulf leases.” It is the targeting of section 199 of the tax code that makes the ensuing political debate a fake.
According to WTAS, one of the largest independent tax, valuation, and financial advisory firms in the United States, Congress enacted Section 199 in 2004 “to encourage the retention and growth of U.S. manufacturing without regard to whether the output of those manufacturers was exported out of the country or consumed domestically.” What it does is to reduce the income tax assessed on the profits of targeted industries, principally manufacturing, construction and natural resource extraction (oil and gas, mining, forestry, etc.).” In its newsletter WTAS also noted, “For good measure, software developers, filmmakers and music publishers were also tagged to benefit from the new incentive.” No one complains about their huge profits.
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