The Tax Cuts and Jobs Act passed by President Donald Trump and congressional Republicans in 2017 has disproportionately benefited corporate America—especially the oil industry.*
According to a study published this month by the Institute on Taxation and Economic Policy (a non-profit, non-partisan think tank), many large oil companies paid no taxes last year. The plan lowered corporate taxes from 35 percent to 21 percent, altered international tax rules, and created a deduction for non-corporate business income in addition to other reforms.
Many of these companies garnered such benefits using a policy of accelerated depreciation, which allows companies to write off capital investment costs significantly faster than the expiration of these investments, allowing them to drastically reduce their tax rates. According to the report, Chevron reported $290 million of depreciation-related tax breaks in 2018, and Halliburton reduced its taxes by $320 million.
Although accelerated depreciation (much like the tax cuts in general) is supposed to encourage business investment, it seems unlikely that it will achieve that goal because research suggests that companies don’t usually make investment decisions based on tax rates.
Other companies were allowed to write off stock-option related expenses “in excess of the cost they reported to shareholders and the public,” according to a separate study by Citizens for Tax Justice cited in the report: 315 companies in the Fortune 500 disclosed that they utilized this tax break for stock options. Fossil fuel tax subsidies, alternative energy tax subsidies, and tax credits were also more readily available under the tax plan.
Oil companies largely benefited from the tax plan, including Chevron, Occidental Petroleum, EOG Resources, Devon Energy, and Duke Energy, as well as oil field services company Halliburton.
Last year, Antonia Juhasz reported for Pacific Standard on how the new tax plan was a boon for big oil:
Just 17 American oil and gas companies reported a combined total of $25 billion in direct one-time benefits from the 2017 Tax Cuts and Jobs Act. Many of the companies will also receive millions of dollars in income tax refunds this year. Looking forward, the Tax Act then reduces all corporate annual tax bills by a minimum of 40 percent every year in perpetuity, while adding new benefits that function as government subsidies for the oil and gas industry. The companies’ activities in the United States are made less expensive, thereby encouraging a further expansion of oil and gas operations.
The new report included the tax benefits of many large American corporations, including Amazon, General Motors, IBM, Netflix, and Delta Air Lines. Collectively, the companies received $4.3 billion in rebates.
Alternative energy received some (although significantly lower) benefits from the tax plan in 2018 as well. Duke Energy received $129 million in renewable energy production tax credits, Xcel Energy claimed $75 million in wind production tax credits, and CMS Energy also reported $14 million in renewable electricity production tax credits.
*Update—May 2nd, 2019: This story has been updated with the correct title of Trump’s 2017 tax bill.
