Big Oil's big break

Note: Politicians are trying to blame the state’s pension funds for Illinois’ chronic fiscal woes. This item is part of “Big Biz, Big Breaks,” a series on tax loopholes that pulls back the curtains on the billions in tax giveaways that are a major cause of the state’s budget shortfall. To learn more about these loopholes – and read other installments in the series – click here.

In 2010, the average Illinoisan pumped 383 gallons of gasoline into his or her vehicle. Those purchases helped fuel the enormous profits of multinational oil companies –Exxon-Mobil alone recorded over $30 billion in profit.

You might expect Illinois to benefit from that arrangement through the collection of state income taxes. But thanks to a quirk in state law, the big oil companies – Exxon-Mobil, BP, Royal Dutch Shell and others – are paying far less in income taxes on profits generated in Illinois than they should.

State law says the big oil companies don’t have to pay income taxes on profits earned from the sale of oil and gas extracted outside the United States. The way the law is written, however, exempts oil extracted mere miles from the shore in waters that are clearly U.S. territory.

This means that every year, $75 million that could be used to build highways, hire teachers or strengthen public worker pensions is instead going to Big Oil.

This massive loophole is no big secret – even Gov. Pat Quinn has called for closing it. Last year, the state Senate passed legislation to close it. But it never became law.

The funding crisis facing state pension funds could provide the push needed to finally end this giveaway to Big Oil. By closing this loophole and others like it, Illinois could generate $2 billion that could go toward providing needed services and ensuring a secure retirement for public employees.

Want to close the Big Oil loophole? Call your legislators now – tell them to close corporate tax loopholes and pass a balanced plan for pension reform supported by the We Are One Illinois coalition. You can reach your legislators using the toll-free AFSCME hotline at (888) 912-5959 or use our click-to-call tool.