An analysis released Monday by advocacy group Friends of the Earth says that eliminating an overlooked loophole included in the Republicans’ 2017 tax legislation amounting to fossil fuel industry “welfare” could help fund renewable infrastructure while advancing smart climate policy.
“One of the biggest presents [former President Donald] Trump ever sent to the oil industry was hidden on page 157 of the Tax Cuts and Jobs Act,” Lukas Ross, author of the new analysis and program manager at Friends of the Earth, said in a statement.
“We can stop this insane corporate welfare and use it to pay for a renewable energy future,” he said.
Dubbed the “tax scam” by its critics, the 2017 bill “took a broken system and made it worse,” according to the analysis. That’s because it put in place a system called Global Intangible Low-Tax Iclean enerncome (GILTI), which was a “disaster.” The shift meant corporations pay “a paltry tax on foreign profits no higher than 10.5% that can in many cases be 0%,” and “literally gives U.S. companies a tax cut for building factories and the like in other countries and shipping jobs overseas,” the analysis states.
Further problematic, says FOE, was the tax law’s exempting of Foreign Oil and Gas Extraction Income, or FOEGI, which lets oil giants like Exxon and Chevron “profit from extraction abroad and bring the profits home—all without paying a dime in U.S. taxes.”
The analysis notes that President Joe Biden is proposing closing the loophole, as a document (pdf) last month by White House indicates. The Treasury Department projects that doing so would bring in nearly $84.8 billion over the next decade. As Ross outlined:
The new plan from the Biden administration is to simply force income from foreign oil and gas extraction into the GILTI calculation. It would also further modify GILTI by eliminating the incentive for offshoring and reducing the deduction from 50% to only 25%. Coupled with the proposed higher corporate tax rate of 28%, the result for Big Oil and every other business would be a fairer system with the tax on foreign profits closer to the tax on domestic profits.
Biden’s proposal to modify the GILTI regime along with $36.5 billion in revenue from proposed repeals of fossil fuel industry tax breaks add up to “a grand total of $121 billion in polluter welfare that could soon be eliminated to help pay for an infrastructure plan that puts workers and the climate first,” the analysis states.
The oil and gas industry, as Bloomberg Tax reported last week, is pushing back against the proposal to shift GILTI calculations. Ken Moy, tax counsel for the American Petroleum Institute, asserted to the outlet that taxing extraction income would “weaken the competitiveness of U.S. companies in the global marketplace, jeopardizing American jobs and limiting energy security.”
Oil companies including Conoco and Chevron have also been lobbying Congress against such shifts, FOE notes, pointing to official lobbying reports submitted this year.
The new analysis says that some legislation already underway could make positive steps towards “repairing the damage” of the Trump administration with regards to propping up the dirty industry.
Such efforts include the End Polluter Welfare Act put forth by Sen. Bernie Sanders (I-Vt.) and Rep. Ilhan Omar (D-Minn.). The legislation would close numerous loopholes and get rid of the GILTI oil extraction exemption.
Other proposed bills singled out in the analysis are the bicameral No Tax Breaks for Outsourcing Act, which would get rid of the GILTI exemption for income from extraction, and the Clean Energy for America Act, which would also eliminate numerous fossil fuel industry subsidies.
Speaking to Common Dreams, Ross framed the importance of ending tax schemes that prop up the fossil fuel industry as crucial far beyond generating any revenue for clean energy infrastructure.
“As a matter of sensible climate policy,” he said, “giveaways to the oil and gas industry should absolutely be eliminated.”
If you liked this article, please donate $5 to keep NationofChange online through November.