NYT editorial: Big Oil’s Good Deal

Editorial

Big Oil’s Good Deal

Published: July 11, 2010

No industry enjoys the array of tax breaks and subsidies that the oil and gas industry does. No industry needs them less. For all the damage it has caused, the disastrous oil spill in the Gulf of Mexico may provide the political momentum to end this special treatment.

President Obama’s 2011 budget, proposed before the spill, would eliminate $4 billion in annual tax breaks for oil and gas companies. Bills in both houses introduced after the spill would achieve many of the same results. Industry has spent $340 million on lobbying over the last two years to block these sorts of initiatives, and until recently Congress has been eager to do its bidding. This year could be different.

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The net result, as The Times reported recently, is an effective tax rate on investment far lower than that paid by other industries. That, the Treasury Department argues, has encouraged overinvestment in oil and gas drilling at the expense of other parts of the economy.

Industry argues that these and other breaks are vital to robust domestic production and that both investment and employment would fall if they were eliminated. These arguments, which may have made sense years ago, are much less compelling when oil prices are hovering near $80 a barrel and oil companies — including BP — have been racking up huge profits.

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President Obama’s 2011 budget, proposed before the spill, would eliminate $4 billion in annual tax breaks for oil and gas companies.