When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.
The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.
At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.
With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure, warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil.
They’ve learned all the appropriate catch phrases used by Democrats and Republicans alike.
But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process…
“The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. “There is no reason for these corporations to shortchange the American taxpayer…”
As oil continues to spread across the Gulf of Mexico, however, the industry is being forced to defend tax breaks that some say are being abused or are outdated…
Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.
Other tax breaks were born of international politics. In an attempt to deter Soviet influence in the Middle East in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers. Saudi Arabia and others began to treat some of the royalties as taxes, which entitled the companies to subtract those payments from their American tax bills…The Treasury Department estimates that it will cost $8.2 billion over the next decade.
So, uh, when was the last time you asked your elected representatives how they voted on tax breaks for the Oil Patch Boys?
If he or she is a Republican, the odds are about 30 to 1 they voted on the side of Big Oil. A Democrat, the odds still are probably 4 to 1 or more. The sort of payoffs that predate the Gingrich Lobbyist assault in 1994 have guaranteed that.
RTFA. It should disturb your morning. I hope you aren’t counting on your local teabaggers telling Congress to do anything different.