Southern California Rep. Katie Porter wants to make it illegal for Big Oil, and all other companies, to get tax credits for any marketing that promotes the use of oil or gas.
Calling credits for such ads “taxpayer-funded climate misinformation campaigns,” Porter, D-Irvine, says oil companies are pitching their products as “green” even when those products contribute to greenhouse gas emissions.
“Big Oil has been lying to the American people for decades about the damage they’re causing our environment,” said Porter, who chairs the House Natural Resources Subcommittee on Oversight and Investigations. “It’s bad enough these corporations poison the planet; they shouldn’t get taxpayer dollars to cover it up.”
The proposal is part of a larger push that’s drawn attention from the likes of the Securities and Exchange Commission to rein in so-called “greenwashing,” where companies capitalize on customers’ desire for more environmentally friendly products and services with little accountability for what’s behind those claims. Porter says, for example, that Chevron regularly markets its products as “green” but only spent 0.2% on renewable resources from 2010-2018.
Chevron and other Big Oil companies so far aren’t commenting on the End Subsidies for Fossil Fuel Advertising Act, which Porter introduced Friday with Rep. Raúl Grijalva, D-Ariz.
Here are five things to know about the proposed legislation:
How exactly do taxpayers “subsidize” oil companies?
Big U.S. oil companies pay billions in taxes each year. But they also pay an effective federal tax rate that’s roughly half what the average American pays thanks to a list of credits, deductions, deferment options and loopholes.
Critics call these “taxpayer subsidies” and have fought to get such benefits removed for the five major oil companies: ExxonMobil, Shell, BP, Chevron and ConocoPhillips. Those same oil companies and their defenders argue that such tax incentives are standard and encourage investment in a high-cost industry.
One of the most controversial oil-related tax credits dates back to 1913. The idea was to give companies an incentive to drill for new wells by allowing them to recover “intangible” related costs whether those wells produced oil or not. But a century later, with new technology, only about 15% of oil wells end up being unproductive. So critics say there’s no good reason for taxpayers to continue to subsidize drilling — particularly given what we now know about the harms of fossil fuels.
Along with a number of tax breaks specific to the oil and gas industries, these companies also get to deduct expenses the same way most other companies do. That’s where marketing costs come into play.
So what exactly would Porter’s bill do?
Advertising is a traditional business expense and most companies are allowed a tax deduction for a portion of what they spend on it. But the tax code has a long list of expenses that can’t be deducted, from golden parachute payments to profits from “the illegal sale of drugs.” (That last clause is why cannabis businesses can’t deduct expenses even if they have state licenses, since cannabis remains illegal at the federal level.)
Porter’s End Subsidies for Fossil Fuel Advertising Act would add marketing that encourages the “extraction, distribution, and consumption of oil and gas and their derivatives” to the list of business expenses that can’t be deducted.
Other than Big Oil, what other companies might be affected by this bill?
Public relations firms and consulting firms that offer “climate disinformation services on behalf of fossil fuel companies” are just one example, Porter’s office said.
A 2021 story from the New York Times, for example, laid out how a consulting firm had been hired by oil and gas companies to launch supposed grassroots marketing campaigns across the country that promoted fossil fuels and downplayed their impact on climate change. Porter’s team says the cost of advertisements that “deny climate science, deflect responsibility to individuals, and falsely champion oil and gas derivatives like methane as ‘clean’ solutions” should not be tax deductible for any business.
How much money are we talking about here?
There’s no official estimate for how much oil and gas companies deduct for such marketing efforts each year. But Porter’s team believes the deductions are worth “at least in the range of hundreds of millions,” judging by a 2012 story on election year ad spending alone. If the government got to keep that money, her office says it could go anywhere Congress chooses, including to offset new spending in other areas.
The Center for American Progress, a progressive think tank, estimates that repealing nine key tax breaks for oil and gas companies would, at minimum, save the U.S. Treasury $37.7 billion over 10 years. And that’s without factoring in advertising write-offs.
What does Big Oil have to say?
Chevron and Shell didn’t respond to a request for comment on Porter’s bill or her concerns about potential greenwashing, while ExxonMobil declined to comment.
When Democrats have pushed in the past to remove tax credits for oil and gas companies, oil executives and industry supporters have argued these are common business deductions that help keep domestic oil production flowing and that it’s not fair to single them out. And they’ve threatened to pull capital out of the United States if such incentives were wiped out.
But Porter and Grijalva say they aren’t buying it.
“It is disturbing to know that we have been supporting disinformation campaigns designed to let the oil and gas industry keep heating the planet,” Grijalva said. “Allowing it to continue would be unconscionable.”
Source: Orange County Register
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