One of the few surprises to come out of the G-20 meeting in Pittsburgh this week was the sudden emphasis in the group statement on ending “inefficient fossil-fuel subsidies.” At first glance, this doesn’t appear to be a big deal. I mean, who would be for inefficient fossil-fuel subsidies, other than the oil and gas industry?

Well, it depends on how you define, “inefficient.” A useful guide to what’s being talked about here is a recent report from the Environmental Law Institute, which concludes that the U.S. has spent approximately $72 billion on fossil fuel subsidies over the last eight years. The bulk of that — $54 billion — consists of various tax breaks. The rest is direct spending on programs that liberals like, such as the Low Income Home Energy Assistance Program ($6 billion), and programs that the government is unlikely ever to get rid of (even though it should), such as the Strategic Petroleum Reserve (another $6 billion). The study also counts funds spent on carbon-capture research ($2 billion) as a subsidy to Big Coal, even though the Democrats’ climate-change bill would vastly increase those expenditures.

So when Obama pledges to end inefficient fossil-fuel subsidies, he’s not talking about the spending; he’s talking about the tax breaks. There are two points to make here: First, getting rid of all the tax breaks listed in the ELI report would constitute a huge tax increase on oil and gas consumers — that’s you — thus violating Obama’s campaign pledge not to raise taxes on anyone making less than $250,000. Obama would counter that by saying that scrapping the breaks would only raise taxes on oil and gas companies, not consumers. This would be an evasion: Corporations are tax collectors, not taxpayers. The corporate income tax is paid by the customers, employees and shareholders of corporations.

Second, many of these tax breaks stem from fundamental flaws in our tax code. The U.S. is one of the few developed countries that taxes its corporations on the profits they make overseas, making its system of taxation “worldwide” rather than “territorial.” (Chris Edwards and Dan Mitchell provide an excellent explanation of the difference between the two in their book Global Tax Revolution.) The IRS allows companies to subtract the amount they pay in foreign income taxes so that their profits are not taxed twice. In many cases, oil and gas companies can also subtract the amount they pay in royalties to foreign governments.

The ERI report counts this tax break as a subsidy ($15.4 billion), reasoning that royalties are not taxes, they are payments to the owners of resources under development. The report points out that the Obama administration wants to change this aspect of the tax code in order to collect an additional $4.5 billion over the next ten years from oil and gas companies consumers. Here’s a better idea: Scrap the worldwide tax system that disadvantages American companies operating overseas and replace it with a territorial sysem.

Look, I’m not saying we should keep all the tax breaks for fossil fuels identified in the ERI report. I’m saying that corporate income taxes are too high; that our system of taxation is too burdensome; and that many of the “breaks” in our tax code were put there to let American businesses stay competitive. When you hear Obama talk about ending subsidies for fossil fuels, you should understand that he’s really talking about raising taxes on energy.