Should American taxpayers stop subsidizing big oil companies? How about abortions? There seems to be a lot of confusion on the issue. In part, that's because there's a lot of confusion about what a subsidy really is.
To hear liberals talk, it's scandalous that Americans are forking over their hard-earned tax dollars to prop up Big Oil. Former Virginia Gov. and DNC chairman Tim Kaine, now running for Jim Webb's Senate seat, last week called on his opponents to join him in opposing "government giveaways for big oil companies," as he put it. "Rep. Tim Scott (R-SC) Defends Fairness of Giving Billions in Oil Subsidies to Exxon," snarled the liberal ThinkProgress last week. " In March, the group groused that "House Republicans unanimously voted to continue big oil subsidies worth billions of dollars a year, even as oil companies are enjoying windfall profits from skyrocketing prices." On Thursday, Virginia Democratic Party executive director David Mills said the oil companies were "getting free money from the government."
Just one problem. Those "subsidies" are not subsidies. They are tax breaks. Of the $4 billion in alleged subsidies to Big Oil, $1.7 billion derives from a domestic manufacturing tax deduction intended to keep factories in the U.S. It is available to every company, not just oil companies. Another $850 million comes from another tax provision, also available to every U.S. corporation, that gives a credit for taxes paid to foreign countries—just as you can deduct your state taxes from your federal income taxes. Yet another $1 billion comes from tax rules that let oil companies treat oil in the ground as capital equipment for write-down purposes, and the rest comes from rules that let oil companies write off certain business costs immediately.
Maybe these are dumb rules. Maybe they need changing. But in no sense can they be called subsidies—i.e., money taken from Smith and given to Jones. The failure to tax Exxon more does not increase your payment to the IRS by one red cent.
How do we know tax credits should not be called subsidies? Just ask The New York Times—which recently tore into House Republicans for their "New Attacks on Women's Rights." The Times editorial excoriated the GOP for passing the "No Taxpayer Funding for Abortion Act." According to the newspaper, the bill "imposes new limitations on abortion access by driving to end abortion insurance coverage in the private market using the nation's tax system as a weapon. A provision would deny tax credits to small businesses that offer private health plans that cover abortion . . . The measure also eliminates the medical-expense deduction for most abortions. . . . Overall, the bill treats tax benefits as the equivalent of public expenditures for abortion." That is something the Times says Congress should not do.
At least regarding abortion. But on May 6, the Times was commending Democratic Sen. Max Baucus as someone who "gets it" on energy. Baucus "is drafting a bill that seeks to repeal $4 billion in annual taxpayer subsidies to the oil industry. . . . The tax breaks—fast write-offs for drilling expenses, generous depletion allowances, and the like—may have been useful years ago but are wholly unnecessary when oil prices and industry profits are reaching new highs."
Likewise, ThinkProgress also considers eliminating the tax write-offs for abortion services the equivalent of a tax hike, calling the proposal a "tax increase on women and small businesses. . . . the bill forces women and small businesses that provide health insurance that covers abortion to pay more in taxes than they would otherwise." Yet when Exxon objected to plans to cut the oil companies' tax breaks, ThinkProgress said the company had "publicly whined . . . that 'they want to increase our taxes.' "
Some conservatives are just as duplicitous—or, if we are being generous to everyone involved, just as unaware of their own contradictions. A tax break for abortion is a government subsidy, they claim, while a tax break for an oil company is not.
Take House Speaker John Boehner. Late last month, he said the oil companies should "pay their fair share" by losing their tax credits and whatnot. But a few days later he recanted, insisting that "raising taxes was a non-starter," as The Hill put it. Then on May 4 Boehner took to the House floor to endorse the No Taxpayer Funding for Abortion Act. "I rise to express my support for . . . applying a ban on taxpayer funding of abortion across all federal programs," he said. "Enacting this legislation would provide the American people with the assurance that their hard-earned tax dollars will not be used to fund abortions."
Well, the law already provides such an assurance, through the Hyde Amendment. And it is fatuous to say that cutting Jones' taxes by $100 because Jones had a medical procedure somehow takes an additional $100 out of Smith's pocket. If that were true, then cutting Jones' taxes by $1,000 would raise Smith's taxes by the same amount as well, and cutting all taxes to zero would at the same time raise all taxes to infinity. Garbage.
(For what it's worth, Virginia's Eric Cantor supports both the abortion measure and the elimination of oil company tax breaks. Two points to him for being consistent.)
A tax break is not a public expenditure and should not be treated as such. But if partisans on the left and right are going to treat it as such in some instances, the least they could do is treat it as such in all of them.