Why not end the deduction entirely? Because that would be too economically harmful. It is easier to scapegoat the largest companies.
That is how the political game is played in Washington. Unfortunately, that game can hurt millions of Americans if politicians are allowed to single out specific industries for punishment.
The other so-called subsidy for American energy producers relates to the tax code's treatment of foreign profits.
American oil and gas companies that have operations overseas pay U.S. taxes on their domestic profits, foreign taxes on the profits they make overseas and more U.S. taxes if they bring home what is left of their foreign income.
Thus the U.S. tax code already double-taxes foreign profits. The Obama administration would change the way those foreign tax payments are treated by the U.S. tax code to further increase the federal government's take.
But "Big Oil" doesn't pay enough in taxes, right? Not so. In May, The New York Times reviewed the total taxes paid from 2007-2012 by all of the S&P 500 companies. "Three big energy firms paid the most taxes in absolute terms: Exxon $146 billion; Chevron $85 billion; and ConocoPhillips $58 billion."
Contrary to popular belief, the energy industry pays stunningly high tax rates. The Times review found that ExxonMobil's effective tax rate over the last five years was 37 percent, Chevron's was 39 percent and ConocoPhillips' was 74 percent! By contrast, McDonald's effective tax rate was 27 percent, and billionaire Warren Buffett's Berkshire Hathaway paid only 23 percent. The median for all companies was 29.1 percent.
It is amazing that energy companies can pay such high tax rates and still create so many American jobs — nearly 10 million. Far from being "giveaways," the small deductions they get for domestic production offset some of the dramatic tax burden this industry bears, and they direct that money back into the American economy by providing a strong incentive for these firms to invest in job-creating energy production.
Scaling back on these incentives means scaling back on the jobs, and that would be a "reform" that no one should want.
Hall is a Republican state senator from Putnam County.