Though activists highlight high overall profits in their screeds, the oil sector's net profit margins after accounting for expenses are actually rather ordinary. The integrated oil and gas industry averages a profit of 6.2 cents per dollar of sales, putting it squarely in the middle of all other industries based on profitability, and lower even than the steel industry which just a few years back convinced President Bush to implement harmful import tariffs to protect them from competition.
Even the basic rhetoric deployed by President Obama and his allies in Congress is misleading. Contrary to the soundbytes, the broadly available tax provisions under attack in the Senate bill are not special "subsidies" from taxpayers because they don’t account for a single cent in federal spending. What’s more, their removal would likely not help to reduce our national debt since Democrats have expressed their hope to use the money raised from these tax hikes to subsidize unproven "green" technologies.
One such "subsidy" is actually a credit known as Section 199 and applies to all domestic producers -- from music producers to soft drink manufacturers. Note that the Finance Committee has yet to call Sony or Coca-Cola to testify on the massive "subisidies" they’re receiving through perfectly legitimate tax credits.
Another target is the "dual capacity" protection, which prevents American firms from being taxed twice on income earned abroad. If the IRS were to double tax U.S. multinationals, they would be put at an enormous competitive disadvantage. Even after these deductions, U.S. oil and gas firms contribute billions each year to local, state, and federal coffers.
Oil companies may make for a convenient scapegoat, but the bottom line is that increasing taxes on American energy is a recipe for higher prices, reduced supplies, fewer jobs and questionable impact on reducing our national debt.
Andrew Moylan is the vice president of Government Affairs for the National Taxpayers Union.