New York Times, June 20, 1946
SHOULD THE AMERICAN TAXPAYER
SUBSIDIZE THE PRODUCTION OF
FOREIGN OIL?
By Walter Matthews
In the 1930s, an obscure bill was passed into law providing American oil companies the privilege of offsetting any royalties paid on the production of foreign oil against taxes due on profits generated from the refining, distribution, and sale of the same oil in the United States.
Historically, the United States has been a self-sufficient producer of its own energy needs and a net exporter of oil. Experts are now forecasting that by the year 1950, the combination of level domestic production and increasing consumption will convert our country into a net importer of oil.
By that time, the “foreign profits tax” provision of the Internal Revenue Service tax code established by this bill is expected to have become a material burden on the American taxpayer. Preliminary estimates indicated that over the ten years following 1950, the tax relief offered the largest oil companies could be approximately $5 billion annually.
Three new public opinion polls are being designed to measure the public’s attitude about this foreign profits tax provision.
The key question being tested by these polls is this: Is the public interest better served by preserving the foreign profits tax and incentivizing the consumption of foreign oil, or by eliminating the provision and using the savings to reduce taxes?
To ensure the reliability of the results, three of the nation’s leading market survey companies have been retained. These surveys will be conducted in the six states that produce over 90 percent of America’s oil and in six states that are the highest consumers of petroleum products. The states of California, Pennsylvania, and Texas will appear in both polls.
The normally unflappable personal secretary of Phil Warner, senior editor of the New York Times, rushed into her boss’s office without knocking.
“Mr. Warner? Jack Hardy of Titus Oil is on the phone. By the way he’s talking, he seems very upset.”
The senior editor hardly had time to place the phone next to his ear before a voice shouted, “Phil, what the hell is going on?”
“Calm down, Jack,” he replied. “I’m sure these surveys won’t reveal anything you can’t handle!”
“How the hell did this thing get started, Phil? I thought we had it stopped!”
“So did I. Several weeks ago Walter Matthews approached me with the idea about polling voters. After we talked, I thought it best for the Times to decline from funding the research project. I just assumed that would be the end of the matter. Apparently some other private party has funded Walt’s surveys.”
“Where could Walter be getting the financial support to conduct these surveys?” said Jack. “They have to be very expensive.”
“Jack, I honestly don’t know. When I asked him to reveal the source of his funding, he refused.”
For the rest of the day, calls from irate senators, congressmen, and oil company executives jammed the newspaper’s switchboard. Phil couldn’t remember when anything the paper had done had caused such a furor. Smiling, he leaned back in his chair, clasping his hands behind his neck. Well, this time it’s going to be really interesting to see where the chips fall! The genie isn’t out of the bottle yet, but the cork is real loose. If he ever gets loose, putting him back in will be harder than putting toothpaste back into the tube.
News of the pending survey quickly spread throughout the oil industry. In Caracas, Houston, San Francisco, New York, New Jersey, London, Teheran, Baghdad, and Riyadh, oil-company executives with tense, drawn faces met to assess the implications of the study and to formulate plans to minimize the damage.
In Washington, the congressmen and senators aligned with the oil lobby were being asked questions they didn’t want to answer. In their casual meetings in the halls, in the privacy of their offices, or in their clubs, they continually asked one another who was behind the surveys, and how they could be stopped.
But the senators from the more populous but non-oil-producing states were smiling. The letters were pouring in, in a ratio of nine to one favoring the repeal of the foreign profits tax provision.
The senators from the oil-producing states were not smiling. Domestic oil producers were already applying pressure toward repeal. Big Oil was pushing them hard in the opposite direction. And the majority of the people, even in these oil states, were favoring repeal. Transparency was becoming a very real issue. Local voters and campaign contributors were becoming a loud and articulate voice against the foreign profits tax provision.
In Washington, the national contributors were calling their lobbyists. Lobbyists were calling congressmen. Dinner parties, golf games, hunting and fishing trips were being arranged. Nobody was amused.
The President of the United States was smiling. Might this struggle over the foreign profits tax be the start of a long-overdue reform movement directed at eliminating the tax preference for foreign oil? Was it the work of Jacques Roth and his friends? It certainly looked like something they might do.
Roger Malone, too, was smiling. This time Jacques has really shaken the tree! the chairman thought. I wonder how he plans to use the information …
At the Castle Dome Ranch, Señor Juan Pablo Perez was also smiling, and not only because he and Mike had come up with the proof they were looking for. The newspaper article indicated to him that someone else had taken up the cause of bringing fairness and honesty to the industry. He briefly wondered if his new American friends had anything to do with the organization of the polling surveys.
In his London office, Sir David Marcus sat at his desk, smiling. “The industry’s historical tree of order is about to be shaken,” he said aloud. “And with change comes new opportunity.”