How big are the tax subsidies for oil companies?

The oil industry receives more than $4 billion in subsidies per year through various provisions in the tax code. Despite what the industry has tried to claim, these are special tax breaks for oil and gas that aren't available to businesses generally.

Why do we give subsidies to oil companies?

Some of these subsidies, like percentage depletion and expensing of intangible drilling costs, go back nearly a hundred years. They've simply remained as permanent fixtures of tax code. The oil industry has lobbied for others, for example a manufacturing deduction that was extended to them in 2004.

Do big oil companies need these subsidies?

No, of course not. The biggest five oil companies reported $32 billion in profits in the first quarter of this year. The high price of oil and these record profits give the companies all the incentive they need to drill and produce more oil.

Congress's Joint Economic Committee has said that cutting the subsidies is unlikely to affect long-run production decisions. And it will have no impact on gas prices in the near term because the price of oil is set on the world market.

Why should we eliminate tax subsidies for oil companies?

People across the country are already being squeezed by high gas prices. And they're asking whether this is the best use of $4 billion in taxpayer money.

Budget deficits have made it even more important to cut out wasteful spending, whether that spending is done directly or through the tax code.

Rest assured, large oil companies will still be incredibly profitable with or without $4 billion of our tax dollars.

What are the prospects for ending oil tax subsidies?

Yesterday, 52 senators voted to eliminate tax subsidies for the big five oil companies. That's less than the 60 votes needed to stop a filibuster.

Nevertheless, the vote showed that there is majority support for ending these wasteful giveaways. Majority Leader Reid said that ending the oil breaks will be a focus of overall budget negotiations. That makes sense: Giving big tax breaks to large oil companies has made our budget problems worse, and we need to fix them.