Senate Democrats Propose Slashing Oil Subsidies
MELISSA BLOCK, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
A group of Senate Democrats traipsed down the Hill from the Capitol today to an Exxon Mobil gas station. And there, standing outdoors, Senator Robert Menendez of New Jersey highlighted the Democrats' latest effort to trim the deficit.
Senator ROBERT MENENDEZ (Democrat, New Jersey): Why on Earth, when we are supposedly working to reduce the deficit, would we be subsidizing the top five oil companies that have collectively made nearly a trillion dollars in profits over the last decade? Why would we be giving them the taxpayers' money to continue to do that?
SIEGEL: Senate Democrats have proposed eliminating tax breaks for oil companies and putting the money towards paying down the deficit. They say that would save $21 billion over the next decade.
To parse these numbers and to find out how these tax breaks work, we're joined now by James Politi of the Financial Times. Welcome to the program.
Mr. JAMES POLITI (U.S. Economics and Trade Correspondent, Financial Times): Thank you for having me.
SIEGEL: And first, give us a sense of what these tax breaks and subsidies are for oil companies.
Mr. POLITI: Well, there are three main subsidies that I'd like to talk about. The first one is a tax credit for taxes paid overseas, so in international markets by the big oil companies. The second is a simple deduction for producing oil and gas in the United States, and that's about six percent. And the other is deduction for drilling costs and expenses that are incurred in exploration.
SIEGEL: And the Democrats are saying eliminate those, the oil companies will do just as well without them?
Mr. POLITI: The Democrats are saying the oil companies are making plenty of profits. They really don't need these tax breaks, especially at a time when the U.S. is focused on fiscal issues and on reining in its deficits.
SIEGEL: Well, here's one reaction to the Democrats to proposal from Conoco Phillips. That company says, and I'm quoting now, "Not only would increased taxes cost jobs, raise consumer prices and shrink government revenue, but they would also hamper our ability to remain competitive and reinvest in jobs, new energy technologies and resources in the United States and internationally." True?
Mr. POLITI: Well, I mean, this is the argument that you're going to hear from the oil companies, and you're going to hear it tomorrow at a hearing in the Senate Finance Committee, and what you're hearing from some Republicans. I mean, the argument is, well, if you cut our tax breaks then we'll have less incentive to drill more and have new projects in the U.S., and that will lead to fewer jobs.
But on the other hand, you could also argue that this is really a drop in the bucket for the oil companies.
SIEGEL: Would ending the tax breaks affect what we pay at the pump for gasoline?
Mr. POLITI: Probably not. I mean, what we pay at the pump is largely due to the crude oil price, which is set in international markets. And I think that ending the tax breaks would have too small of an impact, compared to kind of global demand trends like China's expansion.
SIEGEL: Now, we should admit here that obviously when we talk about the national debt, the size of a drop in that huge bucket is pretty big. Twenty-one billion dollars over a decade, is it significant or is it the proverbial drop in the bucket?
Mr. POLITI: Well, at this point, everyone is working to cut. It's something. It won't solve the problem. But they are trying to find cuts wherever they can.
SIEGEL: James Politi, what's your sense? Was that a photo op at the gas station and that's the end of this or is there any political future on Capitol Hill for eliminating these oil company tax breaks?
Mr. POLITI: I think it's very hard to see this advancing in the House of Representatives, where the Republicans control the majority and they are likely to defend these tax breaks.
On the other hand, there is a push to do a comprehensive tax reform. And that could be part of the deficit reduction talks or that could be separate, and that could happen next year. And in that context, we are seeing some Republicans say, well, maybe these should be actually on the table. So I could see gas companies curbed at some point during these broader efforts.
SIEGEL: Well, James Politi of the Financial Times, thanks for talking with us.
Mr. POLITI: Thank you.
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