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Saturday, December 15 , 2018, 11:54 am | Fair 63º


Letter to the Editor: Oil Industry Taxes

California’s fiscal house is in massive disorder. Legislators are desperately trying to balance a chronically unbalanced budget without making the obvious and difficult choices that need to be made. We need to bring state costs more in line with income, and we need to begin making the state an inviting place in which to start, grow and nurture business activity.

Unfortunately, too many lawmakers continue to believe individuals and businesses in California don’t pay enough taxes. One example of this thinking is the oil severance tax that is a key part of a recent budget plan developed by Democrats in the Senate and Assembly. It would place a 7.75 percent tax on oil production in California, thereby penalizing domestic energy production and encouraging increased oil imports.

A recent study by the nonpartisan Tax Foundation found that oil companies are anything but undertaxed. Federal, state and local taxes paid by oil companies from 1981 through 2008 totaled $1.95 trillion , 40 percent more than all of their corporate earnings during the same period of time, according to the study, titled “Tax Foundation Special Report: Oil Industry Taxes — A Cash Cow for Government.”

According to the Energy Information Agency, in 2007 the effective income tax rate for the major petroleum companies in the United States was 40.4 percent, significantly higher than the statutory U.S. tax rate of 35 percent.

Additional taxes and fees, such as production taxes, import duties and property taxes, paid by the nation’s major oil companies in 2007 amounted to another $12 billion of revenue for various government entities. Finally, just these companies alone collected and remitted to government agencies more than $48 billion in excise taxes imposed on its products.

Oil companies in the United States and California face enormous tax burdens. Proposals to heap even more taxes on these enterprises, especially during a severe recession with sky-high unemployment, will only make it tougher to get Americans working again and harder on consumers who already are feeling severely pinched by the recession.

David Smyser
Western States Petroleum Association

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