Recently, we noted an analysis on The Great Energy Challenge blog by Bill Chameides, Dean of Duke’s Nicholas School of the Environment, which found an incredible 30 to 1 ratio in favor of fossil fuels when it comes to political contributions in the 2011-2012 campaign cycle, as well as a 7:1 ratio for lobbying expenditures in favor of fossil fuels. At the time, we asked what all that money bought. Our theory: all those campaign contributions and lobbying expenditures purchased a great deal of policy influence in Congress for the fossil fuel industry. In turn, that influence helped ensure that the taxpayer-funded corporate welfare gravy train to the fossil fuel industry continued, while simultaneously slowing down momentum towards a clean energy transition, heading off a price on carbon; etc.
Now, a new study by Taxpayers for Common Sense confirms our theory — in spades.
From 2009 through 2013, large U.S.-based oil and gas companies paid far less in federal income taxes than the statutory rate of 35 percent. Thanks to a variety of special tax provisions, these companies were also able to defer payment of a significant portion of the federal taxes they accrued during this period.
According to their financial statements, 20 of the largest oil and gas companies reported a total of $133.3 billion in U.S. pre-tax income from 2009 through 2013. These companies reported total federal income taxes during this period of $32.1 billion, giving them a federal effective tax rate (ETR) of 24.0 percent. Special provisions in the U.S. tax code allowed these companies to defer payment of more than half of this tax bill. This group of companies actually paid $15.6 billion in income taxes to the federal government during the last five years, equal to 11.7 percent of their U.S. pre-tax income. This measure, the amount of U.S. income tax paid regularly every tax period (i.e. not deferred), is known as the “current” tax rate.
Four of the companies in this study – ExxonMobil, ConocoPhillips, Occidental, and Chevron – account for 84 percent of all the income and paid 85 percent of all the taxes for the entire group. These four had an ETR of 24.4 percent and a current ETR of only 13.3 percent. The smaller firms paid an even smaller share of their tax liability on a current basis. When the top four companies and those with losses are excluded from the analysis, the remaining companies reported a 28.9 percent ETR on U.S. income, but only a 3.7 percent current rate. They deferred over 87 percent of their tax liability.
The bottom line is that the fossil fuel industry invests a lot of money into our political system, and receives a healthy return on that investment. How healthy? According to Oil Change International, during the 111th Congress (2009-2010), fossil fuel lobbying expenses amounted to a whopping $347 million, but the reward was $20.5 billion in taxpayer dollars, for a 5,800% “return on political investment.” And that’s not even counting the low tax rate paid by fossil fuels, just the subsidies doled out to this super-wealthy industry every year. Also, see this report by the Center for American Progress, which found that despite the five big oil companies “earn[ing] a combined total of $93 billion” in 2013, they still fought to maintain – and even expand – “their $2.4 billion-per-year tax breaks.”
So, next time you hear the fossil fuel folks claiming that it’s actually clean energy which is heavily subsidized, and which supposedly can’t survive without government support, point them to this article and tell them to…well, have a nice day.