ExxonMobil released some good news today – its profits have reached a five-year high. Exxon’s competitor Chevron also experienced a large fourth quarter bump in earnings. But before employees and shareholders start popping champagne corks, they should keep a close eye on Washington DC.
Already, politicians are seizing upon this news as an opportunity to raise taxes on “Big Oil.” Both White House press secretary Jay Carney and Senate Majority Leader Harry Reid have suggested that these just-announced profit figures could create a better political opportunity to raise taxes on the industry.
They would do so by eliminating a so-called tax loophole for oil and gas companies. Of course, this loophole isn’t really a loophole at all. It’s a broad-based manufacturing tax deduction that is utilized by virtually every company in the Dow Jones index. The deduction should probably be eliminated altogether as part of comprehensive tax reform in which credits and deductions are scrapped and the rate lowered for all companies. But that’s not what the White House and Reid are talking about here. Instead, they want to single out one industry to punish it for being successful. They would keep the manufacturing deductuion for all companies except those in the oil and gas industry.
If the oil industry wanted to curry favor with tax-hike proponents, it would probably be better off losing scads of money and rocketing towards bankruptcy. In that case, they might become the beneficiary of a large taxpayer-funded bailout. Instead, they could see their taxes raised dramatically as a punishment for making profitable business decisions.