The PJ Tatler

Dem Congressman: Ending oil 'subsidies' will lower gas prices

Via RCP (video at the link):

CHRIS JANSING, MSNBC HOST: “Let me ask you is there anything Congress can do to lower fuel prices?”

REP. STEVE ISRAEL (D-NY): “Yeah, there’s lots of things we can do. Start by eliminating the $4 billion subsidy that big oil companies get.”

JANSING: “They say, Congressman, they say that will not affect the price of gas.”

ISRAEL: “Well, of course they’re going to say that. They’re getting the subsidies. It doesn’t surprise me that a bunch of rich oil executives would go to Congress and say ‘don’t touch our subsidies, you have to lower our taxes.’ That’s a self-serving argument. It is just ludicrous that we are continuing to provide $4 billion a year in subsidies to big oil companies that are making more profits than they’ve ever made. And the notion that we can end Medicare in order to fund tax cuts and tax subsidies to oil companies is really transforming this election and electoral battleground.”

Even supposing oil companies get a basket full of custom subsidies, how does raising their operating costs, which is what ending their subsidies would do, translate into lower prices? It wouldn’t of course: The oil companies’ costs would go up, and those cost increases would get passed along to the consumer in the form of higher prices. Anyone who seriously wants to reduce gas prices should consider at least two things: Increasing supply, and lower the federal, state and local taxes that drive the costs up. That the Democrats are uninterested in both tells you that they are not actually interested in lowering prices. They are interested in playing politics.

As for the so-called subsidies for Big Oil, David Hirsanyi reports the “subsidies” are mostly tax breaks that other corporations can and do take advantage of. And oil companies actually tend to pay a higher corporate tax rate than most other types of companies.

In truth, these oil giants are taking advantage of features of the U.S. tax code that are available to most corporations, and of a broad tax break that exists to encourage investments in the manufacturing sector. Even if we accept that these are “subsidies,” we can take comfort in knowing that Washington will periodically incentivize industries that produce something rather than paying them to produce nothing — as is the case with some farmers and nearly all clean-energy outfits. Further, the industry still pays an effective tax rate of 48.4 percent, compared with 28.1 percent for all other S&P Industrials, according to economist Mark J. Perry.

Democrats are using this phony debate over “subsidies” to attack profitable American companies that provide the energy that keeps America moving. Profit is not a bad thing except in the mind of the modern Democrat, and oil companies tend to use those profits the way other types of companies do — research and development, seeking new resources, and hiring more people. Are these bad things? If they don’t make a profit, they don’t stay in business. Or they take their business overseas to countries that won’t attack and demonize them.

As one reader commented in email, if the Democrats were actually interested in taking on an industry that costs more every year while delivering less, they would attack the higher education industry, where taxpayers pay more, students and their parents pay more, even while a college degree is worth less and less every year. But Democrats want the universities to employ and manufacture more liberals who don’t understand basic economics, and really do not care to deliver anything approaching market value to the taxpayers who keep that system funded.