Their View: Bush needs to close loopholes to pay royalties
In addition to the ongoing picking of citizens' pockets by America's oil companies through high fuel prices that have delivered them unprecedented profits, the game is now set to provide the companies with a $7 billion tax break over the next five years. This is not a partisan thing. The tax break for the oil companies was awarded in 1996 by the Clinton administration. The idea was to give them a reduction on the royalties paid to the government on oil and natural gas pumped from federal lands. Such “royalty relief” was meant to encourage the industry to carry out more research and development, an effort to find and exploit more oil for them to sell and the consumer to buy.
Since world oil prices at that point were not that high, in a sense it might have been a good idea.
On the other hand, it was a valid question, even under those circumstances, why U.S. taxpayers should forgo revenue to help oil companies make more money. The idea was, presumably, that otherwise low oil stocks would lead to higher prices, thus costing the consumer more in the long run. Well, maybe.
But the situation is radically different now, 10 years later. American oil companies are rolling in dough. As an example, ExxonMobil's profits in 2005 were $36 billion, the highest of any U.S. company, with revenues of $371 billion - more than even Wal-Mart. But the tax break continues, absent government and congressional action. Government assumptions on oil prices estimate that the companies will be able to pump $65 billion of natural gas and oil from federal properties over the next five years without paying taxes on it.
There will be substantial reluctance on the part of the oil-company-oriented Bush administration and a campaign contribution-oriented Congress to do something about this very expensive raid on the U.S. Treasury. Yet, as it stands, the 2006 budget deficit will likely pass $400 billion; the national debt is over $8 trillion. The oil tax goodie is only $7 billion, but why should the oil companies not pay it in their fat years?
The Bush administration and Congress need to take rapid action to close this loophole and make the oil companies once again pay the royalties. It isn't even a windfall tax - words that send U.S. companies to the K Street lobbying mat. It's only a tax on their profits made off federal lands.
- The Pittsburgh Post-Gazette