Taxes, Energy and Society

Mark Green
Posted November 8, 2011

Yesterday we announced that we would be asking the Joint Select Committee on Deficit Reduction (aka the Super Committee) to focus on job creation and generating revenues to the government through economic growth rather than punitive tax increases.

This drew a sharp response from Congressman Ed Markey:

"Every dollar given to an oil company is another dollar taken away from Medicare, from student loan assistance, from child hunger programs. This isn't some kind of cute social media campaign, it's an anti-social safety net monstrosity that should be given the hashtag #CLUELESS."

Rep. Markey goes on to note:

"The top five oil companies have already made $101 billion in profits so far this year."

As Markey acknowledges in the statement, oil and natural gas companies receive tax deductions, not subsidies. Whether tax deductions represent dollars "given" to oil companies depends on whether you believe that all money is the government's - unless government lets you keep it. Will Wilkinson has some thoughts on that here.

Oil and natural gas companies are good citizens, and we certainly don't want anyone to be #clueless, so let's take a look at the top five companies and taxes. Missing from Markey's statement is the fact that those same companies have paid or accrued $76 billion in income taxes so far this year, which, by Rep. Markey's profit number ($101 billion), means their effective income tax rate is running right at 43 percent.

Also missing is who is making those profits. We'll give Markey a hand here. According to the most recent analysis by the Sonecon consulting firm, 57.6 percent of the shares in the major integrated oil and natural gas companies is owned by institutional investors - asset management firms, public and private pension funds, banks, foundations and others. Individuals own 41.9 percent. The rest, just 0.5 percent of the shares, is owned by corporate management. Here's the significance: Out of every additional dollar taken by government above the current effective tax rate of 43 percent, 99 and ½ cents of it is being taken from current or future retirees, and other investment vehicles, which presumably include college funds.

But even if we want to disregard the fact that these public companies are overwhelmingly owned by the public, let's look at what the result of these taxes will be for government revenue. According to the Wood Mackenzie consulting firm, additional taxes on energy companies could lose the government $29 billion in revenue by 2020 - in addition to 48,000 jobs and 700,000 barrels worth of oil and natural gas per day.

You may also notice on the chart the benefits associated with pro-development energy policies. So it's fair to say that every dollar left on the table by those opposed to oil and natural gas development is a dollar taken away from Medicare, from student loan assistance, and from child hunger programs. Now we're talking #clueless.