Oil & Gas “Tax Breaks” Explained

July 28, 2011

In today’s atmosphere, where big government is attempting to veil its budgetary failures with finger pointing and, at best, misleading inaccuracies, a review of the actual oil and gas “tax breaks” under attack is needed.

From what one can decipher from the obscure rhetoric, most of the “end tax breaks for big oil” mantra is directed at intangible drilling costs (IDC). The word used here, intangible, is a misnomer. The actual expenses incurred by oil companies when drilling a well, such as surveying, ground clearing, fuel, supplies, transportation, labor, etc., is quite tangible. These are the same sort of expenses written off by businesses in every US industry. Removing the ability to reduce revenue by expense is absurd.

Astounding as it is, party politics have driven Washington magnates to mislead public opinion at the expense of the oil industry. The ultimate effect will be higher gas prices and less disposable income for ordinary citizens. When Washington gets bigger and richer, the US taxpayer loses – every time.

While White House rhetoric with regard to oil and gas “tax breaks” has been loud, although unfounded, the oil industry’s support of the American economy has been louder and clear.

The oil and gas industry supplies 9.2 million jobs to Americans, is one of the highest tax contributors, and adds more than $1 trillion to the US economy.