Good news! President Biden has delivered a budget to Congress that would end a raft of special tax giveaways to the fossil fuel industry. The reforms could save taxpayers an additional $121 billion over the next ten years.
In addition to ending unfair advantages that benefit the fossil fuel industry and bilk taxpayers, the proposal will accelerate the country’s move away from dirty oil, gas, and coal. These outdated energy sources produce enormous levels of pollution that harm our communities, natural areas, and climate. It is past time to take the burden of dirty energy away from taxpayers and instead use government incentives like subsidies to support clean energy and the jobs it generates.
Despite their wealth, fossil fuel companies have long benefitted, at the taxpayer’s expense, from a host of special tax benefits in the U.S. tax code that lower the cost of doing business and raise their profits. Recognizing this unfair advantage, the U.S. Department of Treasury has said that these tax preferences ‘distort markets by encouraging more investment in the fossil fuel sector than would occur under a more-neutral tax system.’
The Biden Budget recognizes the need to end these market abuses that support pollution over people.
Federal giveaways targeted for elimination include:
Foreign Oil and Gas Income Exemption: This giveaway allows oil companies to avoid income taxes generated from refining, transportation and distribution of dirty fuels generated overseas. Eliminating this giveaway could save taxpayers $81 billion over ten years.
The Intangible Drilling Costs Deduction: Created more than a century ago, this special tax advantage for the fossil fuel industry allows independent oil and gas companies to immediately deduct all the costs of exploring for and developing an oil well. The U.S. Department of Treasury estimates that ending this special advantage will return $9 billion to taxpayers over the next ten years.
Percentage Depletion: Instead of allowing deductions based on the money invested in a well over its lifetime, this loophole allows fossil fuel companies to deduct 15 percent of their gross income from production. As a result, this giveaway allows many independent oil and gas companies to regularly deduct more money than a well is worth. Eliminating this giveaway will save taxpayers $10 billion in the next decade.
In total, the Biden Budget would eliminate more than a dozen such provisions that make it cheaper for oil, gas, and coal companies to develop and produce their destructive products and help ensure that on their way out, the fossil fuel industry will stop foisting the cost of their destruction onto the American public. This is a strong start along the path of eliminating all subsidies and handouts to one of our dirtiest industries and instead focus on clean energy jobs and infrastructure that will benefit us far into the future.