Media Amplify GOP's Misleading Defense Of Subsidies For Oil Companies

On March 29, Senate Republicans blocked a bill that would have eliminated certain tax subsidies for oil companies. The Congressional Research Service has found that elimination of those subsidies would have little effect on gas prices, but reports by The Washington Post, ABC News, and Fox News have ignored this report and instead uncritically cited a less relevant CRS report to make the case that the bill would be harmful.

The bill, S.2204, titled the Repeal Big Oil Tax Subsidies Act, targeted five subsidies for major integrated oil companies (companies with annual gross receipts over $1 billion and an average daily worldwide production of crude oil of at least 500,000 barrels) that would either be limited or eliminated. The tax benefits targeted for repeal included: (1) the foreign tax credit; (2) the tax deduction for income attributable to oil, natural gas, or primary products thereof; (3) the tax deduction for intangible drilling and development costs; (4) the percentage depletion allowance for oil and gas wells; and (5) the tax deduction for qualified tertiary injectant expenses

A May 2011 Congressional Research Service memorandum titled “Tax Policy and Gasoline” examined the effect of these provisions and found that under current conditions, “a small increase in taxes would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices.” The report added that "[e]ven if the changes in taxes did impact domestic, or overseas exploration and development activity, that does not necessarily imply that less oil would be available in the U.S. market. More might be imported, with little or no effect on gasoline prices."

This report is in line with numerous experts who have said that elimination of subsidies for oil companies will have no effect on gas prices.

But media outlets have uncritically reported the claims by Republicans such as House Speaker John Boehner (R-OH) that have cited a March 2011 CRS report to claim that the bill would increase taxes. But the March 2011 CRS report didn't just examine the five tax subsidies in the bill but also looked at repeal of several oil company tax subsidies that are not in the actual bill.

Moreover, even the CRS report touted by Republicans states any effect on gas prices would likely be on “a small scale.” The report says: “On what would likely be a small scale, the proposals also would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.”

This hasn't stopped major media outlets from amplifying the Republican talking point by uncritically reporting Boehner's argument that the CRS found that Democrats' proposed elimination of tax subsidies for oil companies would increase gas prices.

Reporting on the vote on the oil company subsidy bill, a March 29 Washington Post article stated:

House Speaker John A. Boehner (R-Ohio) circulated independent research showing that increasing taxes on oil companies would likely increase prices for consumers.

In an e-mail to reporters, Boehner cited an analysis from the nonpartisan Congressional Research Service examining the effect of eliminating the subsidies.

“On what would likely be a small scale, the proposals . . . would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence,” according to the analysis. [The Washington Post, 3/29/12]

Similarly a March 29 ABC News article stated:

But Republicans say Obama is calling for an effective tax hike on oil companies that would in turn be passed on to consumers in the form of even higher gas prices. Current nationwide averages are hovering near $4.00 per gallon.


House Speaker John Boehner's office cites a March 2012 report from the non-partisan Congressional Research Service report which says changes to the tax code could “raise the cost of exploration and production, with the possible result of higher consumer prices and more slowly increasing domestic production.” [ABC News, 3/29/12]

And Fox News has taken it even further. During the March 29 edition of Special Report, Fox's chief White House correspondent Ed Henry cited the March 2011 CRS report to state as fact that the Democrats' policy will increase oil prices:

ED HENRY (chief White House correspondent): Just weeks after vowing he'd never support a policy that raises gasoline prices in an election year, President Obama did just that today.

OBAMA: Exxon pocketed nearly $4.7 million every hour.

HENRY: Using the Rose Garden to channel his campaign theme of everyone deserving a fair shake, to demand Congress pass legislation ending $4 billion in tax breaks for the oil and gas industries even though he voted for over $2 billion of them in 2005.

JAY CARNEY (White House press secretary): What I can tell you Ed, is that the oil and gas companies in this country are making record profits, now, in 2012.

HENRY: And even though the non-partisan Congressional Research Service says the move would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.

Henry omitted the fact that CRS actually said tax changes would likely only have this effect on a “small scale. During the segment, Fox compounded the distortion by airing the following graphic:


[Fox News, Special Report, 3/29/11]