New York Times advocates for short-term political gain on tax issue, misses long-term economic gain for Americans

With its Sunday editorial, The New York Times continues the campaign to eliminate – only for the U.S. oil industry – standard deductions that are available to all industries and manufacturers. This is arbitrary, discriminatory and misinformed.

According to the Times’ logic, the price of oil – a globally traded commodity – is up, so people have to pay more for gas, so the government should end tax measures that help protect the jobs of Americans who work in the oil and natural gas industry.

The logic is especially hard to swallow when the Times neglects to mention that it enjoys a higher deduction than we do for one of the measures it’s campaigning to have taken away from our industry.

The measure is the Section 199 domestic manufacturers’ provision. The New York Times – along with auto makers, software developers, movie producers and a whole host of other industries – qualifies for a 9 percent deduction under this provision. The oil and natural gas industry is already limited to a 6 percent deduction.

Predictably, The New York Times’ advocacy for tax discrimination falls directly on the heels of a Senate Finance Committee hearing last week, where some Senators tried to convince Americans that Section 199 is a “big oil subsidy” and should be removed only for the top five oil companies in the U.S.

But there’s more to the story than just tax discrimination and fairness. The measure proposed by the Times and some Senate Democrats is counterproductive in every way – to U.S. economic recovery, to reducing U.S. gas prices, to creating U.S. jobs.

As our chairman and CEO, Rex Tillerson, said in last week’s hearing, taxes are one of the factors that go into a company’s decision on where it is able to invest in energy projects.

If the U.S. government decides to place a higher tax burden on a select few companies, but not their competitors, then those targeted companies won’t have the same ability to compete and invest. It doesn’t take a Senate committee to figure out that making it harder to invest also makes it harder to employ.

So by implementing tax discrimination in the name of “fairness,” politicians have decided that the short-term political gain of punishing “Big Oil” is worth more than the long-term economic gains from opening access to resources and encouraging investment. Here’s a quick look at the long-term view:

  • A recent study has found that approximately $10 billion to $17 billion in direct upstream investment in this country is at risk per year if the Section 199 and other tax provisions are repealed for our industry.
  • One study found that opening up federal lands that Congress has kept off-limits for decades could generate 400,000 new jobs by the year 2025.
  • Another analysis shows that such actions as opening up access to resources could generate as much as $1.7 trillion in government revenue over the life of those resources.

The fact is that jobs in the U.S. oil and natural gas industry – and all of the related economic activity and government revenue that goes along with them when they have the access – are no less important than any others in this country.

So, if there are legitimate, economy-wide tax deductions that help create or sustain jobs, our industry should be treated no differently.

But I guess in The New York Times’ view, this logic just isn’t fit to print because it doesn’t support the political agenda of punishing “Big Oil.”


9 Comments

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  1. Doug MacLellan says:

    In Canada as well as the US, the politicians and the media have started to play games because of the high crude oil price and the resulting high gasoline price. In my view, over the last 40 years I have seen very few journalists show that they know anything about the subject they write. When it comes to energy and taxes they show their leftist bias by writing slanted articles. The problem is that they rarely indicate within the articles that they actually are writing from knowledge or from any in-depth research. The TImes article is another example of poor research, bias ideas and poor writing. It is too bad that journalists write for sensation and not for education. Another reason I read less print material as I rarely find a journalist that knows anything and writes worthy of my readership

    • Neal Hayes says:

      Absolutely agree. The NYT is so biased, its practically printing democratic, liberal propoganda. I wish one so called journalist called from a major media outlet would break down where the money for a gallon of gas goes. I live in So. Cal and constantly hear libs saying Big Oil is getting subsidized. The real subsidies are going to ineffficient ‘green energy’ projects that will never work.

  2. C West says:

    Why does the author claim that the oil and gas industry shouldn’t be treated differently than other companies also enjoying the tax breaks offered through tax section 199? As far as I know these other industries don’t directly effect the economy as does the price for fuel. The statement is made, or inferred, that the repeal of the tax break would be followed by job loss in oil and gas related fields. The phrase “tax discrimination” is used. What about the “economic discrimination”, to be so bold, of the economic and pricing policies that these companies are practicing on an economically handicapped American Public? Forgive me for being melodramatic please. My point is nowhere in this argument against the repeal of tax breaks does the author acknowledge that for several, or so it seems, quarters in a row record profits have been reported by the major oil and gas companies. Why would people lose their jobs when record profits are pouring in? The companies that also enjoy this tax break would arguably be slow to lay people off in a time of decreased profits. I don’t know if that’s true or not, but arguably it can be said. So what if the Times gets a bigger deduction? The paper business is hurting, they’re not reporting record profits! The movie industry hasn’t enjoyed the profits they are used to. The fact of stagnant or declining… read more »

    …revenue versus record income alone separates the oil and gas companies. Yes this is America and these oil companies are entitled to their profits and any tax breaks they can find. But please stop threatening layoffs and claims to be as deserving as any other industry of tax breaks while being set apart because of being the only industry mentioned that is able to reap not only profits, but record profits in a recession. I cannot repeat the word RECORD enough, I’m incredulous each time I hear or say it. It is also well known and hard to deny that the high price of fuel drives the cost of everything high. Movies and newspapers don’t have that effect, they can raise the price of a paper by $1 and a pound of apples won’t cost me a cent more. Because of the rising cost of doing any type of retail business or shipping anything however, that pound of apples along with every other item or service I need is now more expensive. And when asked why, the people selling the goods and services cite the high cost of fuel. I’m not alone in completely believing oil companies raised the price of gasoline as high as they did as an experiment, just to see if we would still buy it. People not only continued to buy but continued for an extended period of time, which gave all the proof needed to continue to raise prices. Don’t tell me that while enjoying record profits you’re unable to lower the price of gasoline. That’s illogical. It’s irresponsible to be in a position of great influence on the economy and continue to tighten the noose. Prove to me an the millions of Americans like me that record profits have nothing to do high gasoline prices. Or you may say, that’s the American way. Capitalism. Supply and demand and the market determines the prices. To which my reply would be don’t hide behind idealisms or attempt to simplify our dependence on oil into a simple two value formula. Perhaps my views are completely unsubstantiated and baseless, in which case I will gladly trade my harsh feelings for knowledge.

  3. Richard Griffith says:

    OK, Exxon Mobil should get the same deductions other big businesses are allowed. But what about the special arrangement the government allowed for your partnership with Synthetic Genomics. You have control of the best genetics for algae, including some strains that release lipid directly into the growth media. What have Exxon Mobil done lately to develop mass-culture of algae that can be used for bio-diesel.
    The common strains of algae (for example, Chlorella V.) are demonstrated to produce at least 100 mt/ha-yr (organic dry weight), with a 33% recoverable oil content (J. Benemann, 2010). A big problem remains in the process development. How to extract the oil from the bio-mass. What have Exxon Mobil done lately on the extraction problem…?

  4. denise ward says:

    The oil industry is in no position to whimper. Crying unfairness just sickens most people who are trying to bring in a clean energy future for this country and a long-term energy policy that is our only hope of having a decent life in the future both environmentally and economically. The oil industry is the engine that subverts everything good that can happen for this country. It spends millions advertising half-truths (where are those studies done that you mentioned? You failed to give their source). Not even needing to read the studies, the fact that your article neglected to provide this most basic adjunct to any article that a sophisticated writer would ensure, proves much about your scant regard for people in general and only concentrate on fairness when it comes to your own. Apart from the idea that all the tax rules need overhauling anyway, the oil industry is the very financier of those lawmakers who oppose any reform of tax laws or otherwise. Your days are numbered, you know it and you’re clinging like hell to hold on. But just as the oil industry once superseded the horse and buggy, so it too is now obsolete. And all those who stand with it will fall. Better to give your shareholders good value by being more with the times. Invest in the industry that will bring them the most likelihood of prosperity in the future – the clean energy industry.

    • Eric Sivertson says:

      “Your days are numbered”, “oil industry now obsolete and those who stand with it will fall”.
      If you are part of the people bringing a clean energy future I am definitly investing in oil. One piece of information I do need before I put everything in oil stocks, (kind of insider trading information),is wether you have talked to your high school career adviser about your plans for pursuing a career in clean energy.
      This would take any risk out of investing and insure a bright future for the oil industry.

      May I recomend a favorite sector within clean energy of gas and oil for you to work in?
      That would be ethanol, the clean corn energy. Very profitable for oil, starting with the petroleum base fertilizers to begin the process of clean energy production. Of course we supplied more product in the manufacturing of the tractors, tires and equipment than any other vendor after you consider the fuel to deliver all materials and matter on top of the oil based products needed to produce farm equipment.
      Begining with fertilizer I believe the actual amount of refined oil, i.e. gas to produce one gallon of ethonol is a min. of .75 gallons.(so does this mean I stand with oil or with clean energy).
      But if ethanol is not your thing we all like the others.Solar panels probably consist of 60% petroleum base material and since the horse and buggy industry is limited to Central park routes carring tourists we will sell… read more »

      …the fuel to move this new clean energy product.
      The steel industry is cleaner but still is a great customer to oil, and also to windturbine folks too.
      The windings of the turbines, so much wire produced and pulled thru oil and lubes to achieve the fine theads of clean energy.And the huge blades made from composite material refined from oil. All the light weight plastics needed to cover, encase and insulate also a petroleum based material.

  5. mike dar says:

    Don’t forget those profits are after the Lobbying and buying politicians, Mineral Resource Beurocrats, and 3rd world payoffs! The one essense not seen given out on the Big boys is a detailed accountng where the $ goes,, other than “operating costs”. Now I know these big boys have oversight on hand at any number of sites within each of their Orgs.. but lets face it, has anyone NOT seen corruption at it’s finest, in any large Corp.? The old saying if it can be done it will,, and I’m sure Exxon feels it only a matter of staying competative, he he he.. just like the Banks!

    Less we forget.. 10% of a billion for margin is a lot more than 10% of a million… such goes the price of oil. up.

  6. John Graham says:

    I don’t have the exact figures, but I started studying this at the time in the seventies gas shortage. It was noted that as the per barrel price of oil went up, the net percentage of profit went down on the finished refined product. That is, at (in the past) $1.85/gal. the profit on the refined product resulted in approx. 18%. At $2.55/gal. it went down to about 11% and so on.
    A retired executive for Chevron told us that, partly, this was to offset bad publicity for resulting profits. However, the company never really pursued this in ad campaigns or press releases, so most of the public didn’t know of Chevron’s (and others) attempt to participate in the joint pain caused by the increase of prices.
    My life experience was in Southern California and rumors were rife.
    None of these were addressed at the time.
    Something else not properly addressed is refining capacity and the amazing statistics involved with that subject.
    It is well known that there hasn’t been a refinery built in about 35 years.
    What hasn’t been stated is that during that period an average of 1.5 refineries have been closed. That’s just in the West.
    While concentrating gasoline production makes refining more efficient, it also wreaks havoc with pricing if and when a refinery goes down for any reason. We tend to discuss oil supply when a major culprit of price increase is refining.
    That’s enough now.

  7. Neal Hayes says:

    Welcome to Obamanomics, also known as crony capitalism. GE pays $0, but some how Big Oil needs to pay more. The New York Times does not let facts get in the way of it’s idealogy.

  8. Doug MacLellan says:

    In Canada as well as the US, the politicians and the media have started to play games because of the high crude oil price and the resulting high gasoline price. In my view, over the last 40 years I have seen very few journalists show that they know anything about the subject they write. When it comes to energy and taxes they show their leftist bias by writing slanted articles. The problem is that they rarely indicate within the articles that they actually are writing from knowledge or from any in-depth research. The TImes article is another example of poor research, bias ideas and poor writing. It is too bad that journalists write for sensation and not for education. Another reason I read less print material as I rarely find a journalist that knows anything and writes worthy of my readership

    • Neal Hayes says:

      Absolutely agree. The NYT is so biased, its practically printing democratic, liberal propoganda. I wish one so called journalist called from a major media outlet would break down where the money for a gallon of gas goes. I live in So. Cal and constantly hear libs saying Big Oil is getting subsidized. The real subsidies are going to ineffficient ‘green energy’ projects that will never work.

  9. C West says:

    Why does the author claim that the oil and gas industry shouldn’t be treated differently than other companies also enjoying the tax breaks offered through tax section 199? As far as I know these other industries don’t directly effect the economy as does the price for fuel. The statement is made, or inferred, that the repeal of the tax break would be followed by job loss in oil and gas related fields. The phrase “tax discrimination” is used. What about the “economic discrimination”, to be so bold, of the economic and pricing policies that these companies are practicing on an economically handicapped American Public? Forgive me for being melodramatic please. My point is nowhere in this argument against the repeal of tax breaks does the author acknowledge that for several, or so it seems, quarters in a row record profits have been reported by the major oil and gas companies. Why would people lose their jobs when record profits are pouring in? The companies that also enjoy this tax break would arguably be slow to lay people off in a time of decreased profits. I don’t know if that’s true or not, but arguably it can be said. So what if the Times gets a bigger deduction? The paper business is hurting, they’re not reporting record profits! The movie industry hasn’t enjoyed the profits they are used to. The fact of stagnant or declining… read more »

    …revenue versus record income alone separates the oil and gas companies. Yes this is America and these oil companies are entitled to their profits and any tax breaks they can find. But please stop threatening layoffs and claims to be as deserving as any other industry of tax breaks while being set apart because of being the only industry mentioned that is able to reap not only profits, but record profits in a recession. I cannot repeat the word RECORD enough, I’m incredulous each time I hear or say it. It is also well known and hard to deny that the high price of fuel drives the cost of everything high. Movies and newspapers don’t have that effect, they can raise the price of a paper by $1 and a pound of apples won’t cost me a cent more. Because of the rising cost of doing any type of retail business or shipping anything however, that pound of apples along with every other item or service I need is now more expensive. And when asked why, the people selling the goods and services cite the high cost of fuel. I’m not alone in completely believing oil companies raised the price of gasoline as high as they did as an experiment, just to see if we would still buy it. People not only continued to buy but continued for an extended period of time, which gave all the proof needed to continue to raise prices. Don’t tell me that while enjoying record profits you’re unable to lower the price of gasoline. That’s illogical. It’s irresponsible to be in a position of great influence on the economy and continue to tighten the noose. Prove to me an the millions of Americans like me that record profits have nothing to do high gasoline prices. Or you may say, that’s the American way. Capitalism. Supply and demand and the market determines the prices. To which my reply would be don’t hide behind idealisms or attempt to simplify our dependence on oil into a simple two value formula. Perhaps my views are completely unsubstantiated and baseless, in which case I will gladly trade my harsh feelings for knowledge.

  10. Richard Griffith says:

    OK, Exxon Mobil should get the same deductions other big businesses are allowed. But what about the special arrangement the government allowed for your partnership with Synthetic Genomics. You have control of the best genetics for algae, including some strains that release lipid directly into the growth media. What have Exxon Mobil done lately to develop mass-culture of algae that can be used for bio-diesel.
    The common strains of algae (for example, Chlorella V.) are demonstrated to produce at least 100 mt/ha-yr (organic dry weight), with a 33% recoverable oil content (J. Benemann, 2010). A big problem remains in the process development. How to extract the oil from the bio-mass. What have Exxon Mobil done lately on the extraction problem…?