Oil Cos. Get to Deduct Costs & Defer Paying Taxes
|August 5, 2014||Posted by Staff under Editorials|
This 2014 excerpt of Weekly Wastebasket, Aug 1, is by Taxpayers for Common Sense.
The effective tax rates of the 20 largest oil and gas companies based in the U.S. from 2009 through 2013 is 24 percent, well below the statutory corporate rate of 35 percent.
The deduction for intangible drilling costs (IDC) has been in the tax code since 1916, a few short years after the income tax was introduced.
Deducting all costs up front – instead of waiting for the asset to generate income and then expensing these costs over 5, 10, or 20 years, like other taxpayers – allows oil companies like ConocoPhillips to shelter more of its current income from federal taxation.
Also, able to defer payment of taxes means the amount the 20 companies in our study paid to the federal government during the last five years was equal to 11.7 percent of their U.S. pre-tax income. What small businesses wouldn’t be psyched to pay a federal income tax rate of less than 12 percent?
By the end of 2013, the 20 companies had accumulated $175.8 billion in total deferred tax liabilities. Depending on how much income they report in the future, it could take a decade or more to eventually pay it.
Ed. Notes: Are they ever forced to pay all of it? When they get caught not paying royalties, nothing happens to them.
This attitude of government toward oil is the complete reversal of sense and logic. Norway, for example, gets 80% of the world price for its oil. So should every nations, for every resource, and for every square foot of valuable surface land.
That’s because nobody made Earth and everyone together as society are the ones who create demand and generate the economic value of oil and the rest of nature we use.
What government should exempt from taxation is not “rent” but the actual earnings of anyone, whether a corporation or an individual. Don’t worry about the rich getting away with not pulling their weight. Their income, more than anyone else’s is “rent” of the money that society spends for the nature it uses.
That spending stream is so huge that oil-rich Alaska pays its residents a dividend and location-lucky Singapore pays its citizens one, too.