It’s Not A F*#&ing Subsidy!

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“While you were busy bitching about the guy who bought a Snickers with his food stamps, Exxon pocketed $9,000 of your tax dollars.” So says the meme posted several days ago by one of my liberal acquaintances. Immediately my BS alarm went off, not because using “$” and “dollars” in the same phrase is redundant, but because it presented an accusation as fact. How long does it take a nutritionally challenged welfare recipient to buy a Snickers bar? 5 minutes? Based on this time frame I calculated that taxpayers give roughly $1 billion to Exxon every year. Really?

I did some investigating and determined from a variety of left wing pundits that the $1 billion comes from “subsidies” given to Exxon. Before we go any further let me define what a “subsidy” is:

Subsidy – a direct pecuniary aid furnished by a government to a private industrial undertaking, charitable organization, or the like.

In other words the government takes money from you in the form of taxes and gives it to someone else – for example the gentleman who was buying the Snickers.

So does the government give $1 billion of the taxes we pay to Exxon every year? Based on the true definition of “subsidy” the answer is an emphatic NO. But here’s where the twisted logic of the authoritarian liberal mind comes into play. Liberals define “subsidy” to mean any instance when the government allows you to KEEP YOUR MONEY. Some of them take it even further and lump in any government action (intentional or not) that might induce someone to purchase your product.

The liberal organization Oil Change International (OCI) came up with its own self-serving definition of “subsidy” in regard to fossil fuels – “any government action that lowers the cost of fossil fuel energy production, raises the price received by energy producers, or lowers the price paid by energy consumers.” Notice the definition does not include the key component of a real subsidy – direct pecuniary aid furnished by a government. There’s a good reason for that. If OCI only counted funds that were paid by the government to oil companies it wouldn’t be able to claim they got subsidies.

Here’s a brief list of liberal defined “subsidies” to Exxon:

1. Corporate income tax deductions and credits for producing, storing, and transporting oil products. When Exxon goes out and finds oil, gets it out of the ground, transports it to a refinery, converts it to gasoline, kerosene, heating oil, etc., stores the product, and delivers it to filling stations so you can fill up your car, the company incurs billions of dollars in expenses. Exxon is allowed by law, just like any other company or individual, to deduct those expenses from its income. This lowers the tax it pays the government, so it gets to keep more of the money it earned. According to OCI allowing Exxon to KEEP ITS OWN MONEY results in a government subsidy of $320 million.

2. The government gives a subsidy (a real one) to poor people to help them pay for energy to heat their homes in the winter. It also allows farmers to deduct the cost of fuel taxes from their income making gasoline cheaper for them to buy. OCI says this is a subsidy to Exxon because it increases the demand for its product (despite the fact that the demand for energy is nearly inelastic). Thus it claims Exxon is getting a government subsidy of $392 million.

3. The government periodically purchases and stores petroleum and heating oil to keep as a national reserve in the event of another oil embargo or disruptive war. Note – the government is paying for a product, it isn’t giving money away. Since the government is buying this oil and sticking it in salt caves or storage tanks OCI claims this is a subsidy to Exxon of $283 million.

4. Finally the government does its own R&D on fossil fuels. It’s debatable that any of this is useful to Exxon, but OCI says this results in a subsidy of $4 million.

What’s amazing about this list is all the things OCI left out. It didn’t count the fuel purchased by the government for invading foreign countries, shooting rockets into space, heating and powering government buildings, and flying the President, his family, and his dog to exotic vacation spots. That must account for a huge percentage of the demand for Exxon’s products. It didn’t count the cost to build and maintain the national transportation infrastructure. That certainly makes it easier for Exxon to ship its products lowering the cost of production. And it didn’t count all the deductions that other businesses and people get thus lowering their taxes and giving them more disposable income. Surely that increases demand for gasoline, heating oil, etc. more than the farmer’s fuel tax exemption does. According to OCI’s definition these are all subsidies to Exxon.

The common element missing from these supposed subsidies is “direct pecuniary aid furnished by a government”. OCI’s accounting of subsidies does not include any actual subsidies. You as a taxpayer are NOT giving any money to Exxon via the government.

I’ve used Exxon as an example but the “subsidy” nonsense gets used by liberals and conservatives, Republicans and Democrats, all the time in situations where there isn’t a real subsidy. Examples of real subsidies are the Federal Flood Insurance program, which annually pays out $200 million more than it takes in, thus your tax dollars make up the difference. Or Solyndra, which received a $535 million government loan guarantee, then went bankrupt. US taxpayers now have to fork over $412 million to cover the company’s bad debt. In both of these cases money is taken from you, the taxpayer, and given to someone else by the government. This is not being done with Exxon or any other oil company.

So the next time one of your less logical or more ignorant friends tells you that taxpayers subsidize big oil, make them define what a subsidy is. After you correct him (because he won’t get it right), make him explain what subsidies the oil companies are getting. You probably won’t be able to convince him but you should get him to shut-up. And if you’re lucky, you might get him to think.

About Author

Wayne Middlesteadt

Wayne Middlesteadt is a 1986 graduate of Georgia Tech and has an MBA from Georgia State University. Currently working as a financial writer and track and field historian, his latest book is Five Ways To Beat The Market.

  • Moses

    No one cares

    • averagejoeusername .

      no one without intelligence cares…

    • @TexasPorcupine

      If you don’t care then why are you here? I know, thinking hurts sometimes and reading is hard.

  • curlishari

    Thank you for spelling it out. I always see those reports about some evil hated corporation gets subsidies, but I had always thought those subsidies in addition to the tax business expenses tax exemption. Am I understanding you correctly?

    • Wayne Middlesteadt

      Politicians and the media frequently lump business deductions and tax exemptions (such as property tax exemptions) together as subsidies. In neither case is money taken from someone else and given to the business. It simply means the government collects less revenue. While you can argue that some of these deductions and exemptions are “unfair” or “preferential” – and in some cases I would agree with you – calling them a subsidy is inaccurate and (intentionally) misleading.

  • JJ Avignon

    Your logic is riddled with more holes than the tax code itself. To claim that tax rebates, refunds, and loopholes shouldn’t be regarded as a monetary giveaways because they were funds earned by the corporation is absurd. All tax revenue is generated by those who earned it i.e. the tax-payer. That’s the nature of taxation. By taking such a hard stance on the absolute meaning of words you undermine your own argument as Food stamps & EBT aren’t “money” either. Even your potential retort that they are a “generally accepted forms of payment for goods or services” could be combated by suggesting that you try to pay down our nations debt with Food stamps. A credit is a credit; it’s all monetary. Moreover you’re argument is solely based on the improper usage of the term “subsidy” You’re arguing semantics rather than the point. The point is that no one(esp. in Congress) is complaining, or chipping away at the larger sum accredited to corporations from the total welfare budget. It’s that we have this notion that helping a business to succeed is a benefit, and helping an individual is a burden. It’s a ridiculous premise to begin with. Helping Americans, on any level, helps America. Preventing workers & their families from going hungry helps them stay healthy, which in turn helps them to continue working, buying, selling, growing… Helping individuals that can’t help themselves prevents them from becoming a greater burden to someone else. It’s called investing in the welfare of your country. I’ll reiterate, welfare is investing in your country. It’s the most basic patriotic service we can provide.

    Not to sound too patronizing but you seem to pride yourself on being able to follow logical progressions. If the hypothetical Snicker guy no longer receives those benefits it’s been demonstrated that he will most likely turn towards a criminal enterprise to sustain himself. To which most supporting your argument would reason, “Great let the criminal justice system handle him.” But who pays for that… Us. A substantial bit more in fact. The moral is that we can’t skirt our civic responsibilities to help our countrymen without it biting us in the ass. It’s about being proactive, rather than allowing things to fail, fester & then rot. It’s the basis behind the social contract we accept as members of a civilized society. It’s why you(personally) don’t need to pave your own potholes, and are required to put out your cities fires… because doing it together makes it easier for all of us. It allows for specialization(or is Amish the ideal?). Sure there are people that take advantage of that system. There are numerous examples of corporate enterprises exploiting the welfare system, but that doesn’t mean that we’re somehow exempt from our responsibilities. It means we need to fix it. Side note: Fraud in social welfare is exceptionally low because of a regular vetting of it’s recipients. Those found to be fraudulent are prosecuted to the full extent of the law. So chances are, the people that are on welfare, actually need it.

    That all being said, I agree that the meme is promoting a logical fallacy, but responding with another set of fallacies is no way of exacting truth. There are real problems that we need to fix within our system. Welfare is not one of them. It’s just another in a long string of straw men arguments that sides us against the usual political suspects; the poor, drug-users, & immigrants. Those in no position to defend themselves.

    P.S. If I’m to define “subsidy”, then I expect you to accurately define “Liberalism” & “Conservatism”.

    • Wayne Middlesteadt

      “Moreover you’re argument is solely based on the improper usage of the term “subsidy” You’re arguing semantics rather than the point. ”

      Actually, that is exactly the point. You’re trying to change the subject to something that wasn’t even discussed. I’m sure PRL would welcome an article from you on how “welfare is an investment” and you can explain how transferring money from one person to another by using force isn’t theft.

      BTW, arguing that food stamps aren’t money because you can’t use them to pay off the debt is nonsensical. You also can’t pay off the debt in Euros, Yen, or Pounds – are they not money?

      • JJ Avignon

        I was attempting to steer your attention towards the point of the meme. By losing yourself in the details you’ve overlooked it’s meaning. Which is that credit is unequally distributed via inconsistencies in the tax code based solely on our political perceptions in regards to what is
        of value to our society. That being said, the meme doesn’t mention anything about “subsidies”. Does that mean that “you’re trying to change the subject to something that wasn’t even discussed” by delving deeper into the issue? You’re argument is myopic in scope. You’re equivocating behind your interpretation of what constitutes a direct “pecuniary” giveaway.

        I pointed out that ALL(see I can unnecessarily CAPITALIZE things for emphasis too) credit is monetary. Money itself is credit. It’s the fiduciary interplay of debt between our Govt. & the Federal Reserve. To draw such arbitrary lines as to call tax credits, rebates, refunds, loopholes etc. is as ridiculous as my example of EBT being disregarded as “money” because of it’s limitations. My point is that your strict definitions would exclude it from being regarded as a direct monetary asset.

        Exxon is charging their customers what they(Exxon) are billing as tax(what you have mistakenly defined as “IT’S OWN MONEY”) & then keeping it under the pretense that their cost of business should be billed to the govt.(a.k.a. the taxpayer) In effect, we are to pay for the privilege of them doing business. How you’ve managed to redefine taking from what they charged their customers as, and owe in taxes to be anything other than a direct monetary procurement is beyond me. I’m not sure where your logic is failing you in that equation, but it is. By the rational that you have detailed every worker in the United States should be able to write off the cost of housing(storage), food(production), sleep, medical, vacation(refinement) etc. etc. Everything that allows us to be viable workers. But then, we’re individuals, so of course that seems unreasonable. Again, the initial point of the meme; our perception & how it justifies political inconsistencies within the tax code.

    • @TexasPorcupine

      I know it’s s novel idea to an apparent statist, but the moral of the story is that people should be allowed to keep the money they make.

      • JJ Avignon

        That may be Mr. Middlesteadt’s political outlook, but it’s certainly not the “moral of the story”. His point is that charging your customers tax & then keeping it is somehow earned income. Which by virtue of Govt. sanction is therefore perfectly legal, and morally of a different standard than an individual collecting food stamps. I argue that it is not, and this is why the government defines Exxon’s rebate as a subsidy, rather than the alternative; fraud.

        As for your assertions of my being a “statist”, that may be true(at least by your standard). I believe in a limited, effective govt. “of the people, by the people,[&] for the people” as outlined in the United States Constitution. I tend to define myself as being a morally responsible person with a firm grasp on history & economics. One who knows that Laissez-faire, or that glorified unregulated free-market; deified by all things conservative(despite it being a concept of traditional Liberalism), degenerates into free-market killing monopolies. Where a very few at the top squeeze everything below them into a state of squalor. I prefer a limited amount of govt. regulation, which I know sounds like an oxymoron to those who lack the capacity for nuance, as opposed to something with a proven track record of failure. I prefer what is best for the greatest number of us. This probably comes across as more bleeding-heart bullshit, but my preferred economic model created the middle-class & got us to the moon & back. Where did yours take us?

  • guestjr2

    The biggest subsidies to oil companies are state maintained roads. But suggest taking that away, and see how quick people who hate “subsidies for Exxon” lose their shit.

  • Atropine

    This hardly qualifies as Libertarian. Corporatist Republican, sure, but not Libertarian. The corporation is by definition a legal entity with protections and strictures defined for it by a government. It is largely because corporations like Monsanto and Exxon are allowed to regulate themselves vis a vis the system of lobbies that they are exempt from the rules other corporations are forced to live by which gives them an unfair advantage and tips the ‘free market’ in their favor. At any rate, you’re not a libertarian, you’re a corporate whore and a neo-feudalist. What a fucking joke.