If you're in the oil business and your name isn't Hugo Chavez, then the Democrat Congress just raised your taxes...
...and encouraged more "outsourcing," to boot. Well done, all.
By Jeff Emanuel Posted in Backfiring Democrat legislation | Economics | Energy | Paying at the Pump | Pro-Communist Democrats — Comments (20) / Email this page » / Leave a comment »
At the end of last week, the House passed an energy bill that stripped $18 billion in tax credits for research and exploration from five “major integrated oil companies” (Exxon, Chevron, BP, Shell and ConocoPhillips).
Believe it or not, that’s the good news.
Given that, I’ll bet you’re wondering what the bad news must be. Well, it’s simply this: Citgo, which receives all of its oil from Venezuela’s state oil firm and its dictatorial leader, Hugo Chavez, was exempted from the tax hike. Under HR 5351, Citgo gets to keep the 6% tax deduction for domestic manufacturing that its fellow Big Oils lose because – get this -- it doesn't drill for its own oil, and it gets its oil from outside the United States.
Economically speaking, this bill will – as any high school Economics student (well, at a private school, anyway) could tell you – have an expressly negative effect on America’s fuel industry – and on its economy as a whole. In the war to “end America’s dependence on foreign oil” that the Democrats continually claim to be fighting, they’ve given some major points to the other side here.
Follow me below the fold, if you will.
First, by increasing taxes on Big Oil, Congress has stripped these companies of cash needed to develop new sources and technology. Though their profits are what makes the nightly news, these large “integrated oil companies” are also the biggest spender on exploration and R&D in the world. By taking that tax hike straight out of their cash incentive to perform R&D, they’ve ensured that the first cost-saving move by the companies will be to scrap that search for new sources and technologies.
Second, no company or group of companies is simply going to “eat” an $18 billion tax hike; instead, these increased costs will be passed straight on to you and me at the gas pump. When those prices do go up – and they will – I fully expect to hear Democrats on television and on the floor of the House railing against the eeeeeevil corporations that form Big Oil for their eeeeevil “price-gouging” tactics. Ah, the benefits of being in a position of nearly unlimited power, and having a largely ignorant public to preach and to pander to – one can feel free to use their legislative ability to create all kinds of bad situations, and then turn and place the blame for them squarely on the victims of your own legislation that created the situation in the first place. I guess it plays well in New York or in Seattle, anyway.
Finally – and here’s the biggie for the party that has spent an inordinate amount of time the last few years condemning companies for “outsourcing” and for daring to take some of their operations abroad – this legislation gives American oil companies long-term incentive to relocate their operations outside of the U.S., so as to recoup the 6% tax break they lost last week and to match Hugo Chavez’s comparative advantage.
In summary, the Democrats – unsurprisingly – passed a bill which goes against everything they claim to stand for (except for penalizing the pants off of Big Oil just because it exists) by (a) encouraging “outsourcing,” (b) penalizing “working families” by making them pay more at the gas pump, (c) stifling the research and development necessary to help lessen our dependence on foreign oil, and (d) giving major tax relief to an avowed enemy of the U.S. and its allies, Hugo Chavez, while revoking American corporations’ access to that tax relief. Pretty standard stuff, there.
I fully expect to hear them grousing about the effects of their legislation within months, while carefully avoiding the apportionment of blame where it belongs: with those who passed this misguided “poison pill” of a bill.
If you're in the oil business and your name isn't Hugo Chavez, then the Democrat Congress just raised your taxes... 20 Comments (0 topical, 20 editorial, 0 hidden) Post a comment »
Not only are we subsidizing so-called green energy. We are now punishing domestic oil and further subsidizing tyrant-owned thugocracies.
This Congress is easily the worst Congress ever.
I hate to engage in hyperbole here, but the phrase "treason" sure seems to apply there.
"No matter how much lipstick you put on the taxation pig, it's still a pig... and it's currently snout-down in your wallet." - Michael Fisk
it indicates to me one of only a few possibilities:
1. Nobody actually read the bill.
2. There are Democrats (and probably Republicans) receiving significant contributions from Citgo or some other arm of the Venezuelan government.
3. Idiots. (But this probably repeats 1.)
4. Some combination of the above (e. g. a Democrat receiving such contributions introduced an amendment late in the process that ...).
Could be enviro-weenie activism, now that I think about it. They're usually a little more broadly focused than just the US concerns, but if I wanted to discourage to production of petroleum from domestic sources such as, say, ANWR ...
______________________________
"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
Bob Schaffer and Steve Pearce appreciate your votes in favor of the tax increase. Tom's vote in particular offers an opening where one is much needed.
Is why they are continually able to get away with this nonsense. Bloggers here on this sight, all of whom(I assume) have jobs and do this in their spare time are able to find information and formulate cogent and compelling refutations of every talking point the left has. Why on Earth then, are our political leaders, who have staffs of political advisors, speech writers, etc. unable or unwilling to stand up and publicly demolish the myths that sustain the left's power?
The naive forgive and forget.
The foolish forget but do not forgive.
The wise forgive but do not forget.
Heck, I have two full time jobs (and several of the Lawyer contributors here might as well), and neither is this.
Hm. Interesting. Perhaps you should call your Congressman and ask :-)
I'm not sure if I agree with giving Citco some sort of advantage. I'm not convinced I am hearing the whole story. I favor a level playing field with as little market distorting government involvement as possible.
But I think most of these tax breaks were part of President Bush's energy bill. They were then widely criticized as corporate welfare and I don't see that anything has now changed. These taxbreaks were essentially huge taxpayer funded subsidies.
The energy majors have been turning in record profits for several years now. I have no problem with them making profits and even huge windfall profits. Those are the spoils of wise investing. But I see no reason why taxpayers should be giving them a subsidy in the form of tax breaks.
I don't favor subsidies for farmers and I don't see why I would favor subsidies for energy companies. The energy industry should play by the same tax rules as everybody else.
I would say the profitability of these companies is besides the point, a good point, that the government ought not be showing favoritism toward some industries, some companies, some individuals, at the expense of others.
Certainly, the best scenario we might have seen to correct the situation would have been to extend to every other functioning American company a tax decrease equivalent to whatever these oil companies got. Two wins: equal treatment by government, and lower taxes, (and perhaps, a willingness to reduce the size of government in order to live within its reduced "income").
The second best scenario would have been to repeal all such industry or company specific tax breaks. One win: equal treatment by government.
So it seems the actual action is somewhere below that - a partial repeal that still leaves some lingering degree of unequal treatment.
I think that tax credits like these are a classic example of how our conservative movement has gone awry. We reject, with some consistency, the idea of intervening in economic activity via regulatory policy, but we are eager to undertake central economic planning as long as the tool used is the tax code. This tax "credit" is just another mechanism for redistributing wealth - taking profits from corporations performing less "admirable" economic functions and sending them to oil companies for engaging in government-approved activities.
As a practical matter, the original author may be correct that stripping energy companies of large tax credits is ill-advised in the current economic climate. I would even allow that some type of economic intervention may be justifiable in this case; domestic energy production has national secirity benefits that will not be fully captured in the market price for the resulting product. And, of course, I wholly reject the idea that we should remove tax credits simply because the benefitting corporations have reaped "excessive profits."
Still, if one opposes the measure by the Democrats discussed in the article, I think it should be for the pragmatic reasons above and not an ill-conceived ideological argument against "higher taxes." Our knee-jerk reaction should not be to defend significant government interference in the economy simply because the intervention is disguised in the form of a "tax break."
I'm not a big fan of government welfare, corporate or otherwise. I think the analogy of farm subsidies to oil companies was valid. Perhaps someone with more raw numbers knowledge could post some tax percentage averages for various industries. How much does it vary by company? By industry? By sales numbers? I'm curious about the details. Where do these oil companies rank?
The main part of this diary that bothered me was the Citgo exception, which I knew nothing about. I'm more then willing to admit my imperfect understanding of bills such as these: the details, the list of who donated to who, etc. But that exception seems ridiculous in an obvious way.
It's not clear to me that overseas production is "keeping a tax break" that domestic production is not. I think the provision in question only applied to domestic production in the first place, so repealing it puts domestic and overseas on the same footing. At any rate, it sounds like this isn't going anywhere this year (it's similar to the measure the Senate came one vote short on last year, and Bush has threatened a veto).
peace,
lilnev
...economic malfeasance and boneheadedness by the government. But looking at the credit crisis, which has been going nonstop since at least last August, I have to say this:
It's hard to imagine how the US government could screw up the economy any worse than it's managing to do all by itself.
Sorry, Jeff, you know I don't usually threadjack, but things aren't getting any better these days. Given how Republican politicians seem to have no better ideas than Democrats these days, not much that Congress does could surprise me.
I'm being tripped up by your syntax.
But rather than continue a threadjack here, any chance you could expound on your thoughts in a separate post?
Would you please list the congressional bill # if you are going to criticize it, so that others can read it for themselves.
“.....women and minorities hardest hit”