It’s Not A F*#&ing Subsidy!


“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.