Using the language of the GOBP, "shakedown" is just the word to describe the tax subsidies paid to Big Oil by taxpayers. Give us the tax break or else! Threatening job losses and higher prices, Big Oils message is pretty obvious. They even have the guts to call the industries $4 billion in tax breaks a year a bargain. If the GOBP were truly free market advocates, they would not only call Big Oils bluff, but tell them to roll with the economic ups and downs like everyone else:
NY Times: Oil industry officials say that the tax breaks, which average about $4 billion a year according to various government reports, are a bargain for taxpayers. By helping producers weather market fluctuations and invest in technology, tax incentives are supporting an industry that the officials say provides 9.2 million jobs.
Wouldn't it be nice in a "free market," Ayn Randian system, if we could all get huge tax breaks and subsidies when times get tough? That's why the whole argument about capitalism is a flawed game already won by big business. Here are just a few outrageous facts:
Deepwater Horizon drilling platform 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 … used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon ...
Ending the subsidies and ending their tax avoidance policies, where the "American tax code indicates that oil production is among the most heavily subsidized businesses," prompted this "shakedown" threat to Americans:
the industry is … warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil.
Other gaping holes in the "free market" myth:
The Congressional Budget Office (report) in 2005, (found) capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.
Jack N. Gerard, president of the American Petroleum Institute, warns that any cut in subsidies will cost jobs. “These companies evaluate costs, risks and opportunities across the globe. So if the U.S. makes changes in the tax code that discourage drilling in gulf waters, they will go elsewhere and take their jobs with them.”
“We’re giving tax breaks to highly profitable companies to do what they would be doing anyway,” said Sima J. Gandhi, a policy analyst at the Center for American Progress, a liberal research organization. “That’s not an incentive; that’s a giveaway.”
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 … in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers … 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.
As recently as 2005, when windfall profits for energy companies prompted even President George W. Bush — a former Texas oilman himself — to publicly call for an end to incentives, the energy bill he and Congress enacted still included $2.6 billion in oil subsidies. In 2007, after Democrats took control of Congress, a move to end the tax breaks failed.
After spoiling the oil industry for decades, ending tax breaks by a mere $2 billion a year is still enough to illicit Big Oils taxpayer "shakedown."
The Obama administration (is pushing) 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.”
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