Senate Democrats introduced a bill Tuesday that would end tax breaks for oil companies and divert the savings toward reducing deficits.
Things this policy would not do: 1. It would not do much to lower deficits — it would only save the Treasury $21 billion over a decade; 2. It would not lower or increase gas prices — the subsidies are tiny relative to the size of the industry; 3. It would not punish those most responsible for high gas prices — oil companies are often blamed and even investigated for gas price spikes, but in the past the government hasn’t found the “price gouging” it went looking for, and there’s little reason to think it would this time.
So why is eliminating oil company tax breaks a good idea?
They aren’t necessary to convince firms to drill and refine; the potential for profit will do plenty of that. The government might as well collect its money instead of supporting an industry that it needn’t — and shouldn’t. Doing so would also help America meet commitments it and other Group of 20 nations made to slash inefficient fossil subsidies — one of the most obvious things countries can do to save money and to cut harmful emissions — so it might be easier to convince others to follow through.
More importantly for the Democrats, there is a symbolism to the policy amid ongoing struggles with Republicans over budget deficits. House Speaker John Boehner (R-Ohio) on Monday said that tax increases weren’t an option for deficit cutting. But did he rule out ending tax breaks, too? It’s unclear what he meant, but highlighting oil company tax incentives shows in explicit terms that there are revenues the government can raise easily by uncomplicating the tax code. More of this should happen, producing much greater savings.
The policy’s biggest fault is that it doesn’t do enough of a good thing, which is reflected in 1 and 2 above. Neither Democrats nor Republicans are fully addressing the big question on fossil fuels and taxes: How much should the government tax them, given the many social costs of burning them — air pollution, climate change, dependence on unsavory foreign regimes? The rational answer: More than it is now, and more than removing tax breaks would do. Not only would this help to rationalize American energy markets, it would raise money to pay for things we need, such as roads, bridges, tunnels and other infrastructure.
So far, neither party seems to be responsible enough to go that far.