Effects of Tax Break for Oil Companies

The course of the study will focus on the effects of tax breaks for oil companies. The primary intention behind the implementation of tax and waiver of tax breaks on oil companies is to generate income that is supposed to be used for the welfare of the society and, to finance the budget of the company. The basic rationale behind the tax break is to generate profit for government expenses. One of the most important uses of taxes is to generate profit for public goods and services, such as street cleaning and street lighting. In today's world, oil has become the main source of energy in certain areas (Harder, p-14). The record profits reported by the oil sector companies have propelled the political momentum of the democrat party to revoke subsidies for the oil and gas sector companies. The primary rationale behind this argument from the democrats is to ensure the implementation of the tax on the oil sector which is quite low around 9% while the other business sector are paying tax of 35%.

The current economic recession faced by the American economy is also a contributing factor towards the tax break of oil companies. An increasing number of senate members inclined to eliminate the tax subsidies currently provided to the oil industry which is around $4 billion a year (Harder, p-14). The production of the oil at international level was at 3.094 billion tons in 1978. It rose to 3.592 billion tones in 2002 and 3.666 billion tones in 2003 and 3.85 billion tones in 2005. Oil generates large financial resources that states cannot leave indifferent. Also, oil is the underlying cause of countless economic and political crises. Oil used in various sectors (transport, electricity, agriculture) and even for military purposes. Other oil ...