“It’s time for oil companies to pay their fair share in taxes.” In recent months, that refrain has been expressed in some form or another in the halls of Congress, on stump speeches and even in President Obama’s State of the Union address. From listening to some federal lawmakers, it’s hard to believe oil and natural gas companies pay any taxes at all.
In truth, oil companies don’t pay their fair share. They pay far more.
| Mitt Romney addresses reporters outside the now-defunct Solyndra manufacturing facility.
The top corporate income tax rate in the U.S. is 35 percent. America’s three largest oil companies, ExxonMobil, Chevron and ConocoPhillips, pay taxes in excess of 40 percent. ExxonMobil pays a tax rate of 45 percent, shelling out over $12 billion in federal taxes in 2011.
By creating a fictional narrative that oil companies are tax dodgers, it’s obvious that the president and certain members of Congress hope to create a misdirection to guide Americans away from facts. Facts like: Politicians in D.C. are searching for every revenue stream they can find to pay for their years of reckless spending and they see additional levies on already highly taxed oil companies as one option.
Facts like: The irrational U.S. corporate income tax system actually penalizes companies that generate revenue and rewards companies for shipping jobs overseas. And facts like: Almost every company in the U.S. pays less in taxes than oil companies.
Fair and low corporate tax rates generate economic growth, produce jobs, and make goods and services cheaper for consumers. Apparently, the United States is the only country in the world that hasn’t gotten the memo.
Over the past decade, the global average corporate tax rate dropped from 32 percent to 25 percent, while the U.S. rate remained exactly the same. Consequently, America now has the highest corporate tax rate in the industrialized world.
To make matters worse, the federal government also taxes U.S.-based companies on money they make in foreign countries in addition to income earned domestically. America is one of the only countries to do so.
Unsurprisingly, many business leaders are considering leaving the U.S for countries with lower tax rates on domestic earnings and little to no tax liabilities on income earned abroad. Some already have.
The U.S. corporate tax structure doesn't just kill American jobs. It also plays favorites. In recent years, federal lawmakers have showered preferred industries and companies with tax breaks and other preferential treatment.
As a result, seemingly every corporation faces a different tax rate depending on how much lawmakers like them, how good their lobbyists are and how well they’re able to exploit tax shelters.
For instance, America’s 20 most profitable companies paid an average of 25.4 percent in taxes in 2010. In the same year, General Electric paid just 7.4 percent. And last year, Apple paid 9.8 percent. Almost every company in the United States pays a lower tax rate than oil companies.
And what do politicians do with the extra cash they extract from oil companies? They subsidize the industry's competitors.
In 2011, the federal government gave away $16 billion in taxpayer dollars to subsidize non-traditional energy schemes. Included in the handouts were a $6 billion giveaway for ethanol companies and millions more to bankroll solar-energy companies like the infamous — and now-bankrupt — solar-panel maker Solyndra.
It's the stated goal of many of these alternative energy firms to put oil companies out of business. That's all well and good. But they shouldn't get a multibillion-dollar assist from taxpayers.
Only the federal government could see the "fairness" in taking a hefty slice of the oil industry's revenues as taxes and using it to fuel the sector's downfall.
Oil companies may make for convenient — and politically popular — targets. But the fact is they pay more than their fair share in taxes. Rather than trying to tax oil companies even more, lawmakers should instead direct their energies toward fixing America’s expensive and uneven corporate tax system — before it drives any more companies and jobs out of the country.
Drew Johnson is a senior fellow at the Taxpayers Protection Alliance, a nonpartisan, nonprofit educational organization dedicated to a smaller, more responsible government. Read more reports from Drew Johnson — Click Here Now.
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