On Monday, House Speaker John Boehner said that oil companies are “gonna pay their fair share in taxes and they should” and that the industry did not “need to have the oil depletion allowances” they currently receive.
But that just incensed the corporate-owned wing-nuts who screamed that any reduction in corporate subsidies — including the $4 billion in tax breaks received by the oil companies — is a “tax increase”. In other words, the Republicans have bravely made their stand in favor of corporate welfare.
So it is no surprise that on Thursday Boehner wouldn’t even allow a vote to occur on ending oil company subsidies. Remember, these are subsidies that even the oil industry admits they don’t need.
At a time when our ridiculous dependence on oil threatens our national security, our environment, and our economy, we don’t need to be subsidizing that dependence with our taxes. All those people who claim to believe in free markets need to put their money where their mouths are and oppose these subsidies. And second, we need to immediately put the brakes on rampant speculation, not just in oil, but in all commodity markets. We need to get back to free markets that obey the laws of supply and demand.
UPDATE: A good explanation of how speculators are responsible for high oil prices (as well as high food prices). The supply of oil is at an all-time high, and demand is down, but the price just continues to rise. The media is going to try to convince you that high prices are a result of unrest in the middle east, but that’s not the real reason.
11 Comments
I got my Exxon voting Proxy yesterday. They reported a 45% tax rate on their earnings. I don’t know what to make of it. They are sending huge amounts of money back to the government to be returned to them in subsidies. Please explain.
EBDoug, that doesn’t make any sense. Earnings are normally calculated after taxes are taken out (unless they specifically say pre-tax earnings). And the subsidies we are talking about are mainly tax breaks (to me, it doesn’t matter if you give someone money by reducing their normal taxes or by giving them a check, it is still welfare).
What taxes are they talking about? In 2009, Exxon didn’t pay any corporate income taxes at all, and did get a check from the government.
Stats on Exxon: In millions:
2010income=$383,221
costs and other deductions=330,262(which includes sales based taxes and “other taxes and duties”
Income before income taxes=52,959
Income Taxes=$21,561(now that might all be state taxes for all I know)
All numbers were up from 2009 and way down from 2008, including the dividends.
Perhaps Exxon pays no Federal tax. That is not broken down.
The income taxes might also not just be US taxes. Many large companies shelter their income by moving it to countries with lower corporate tax rates.
Also note that they are taking deductions out of their income first (treating them as a cost). That means that some of their revenue is sheltered from taxes. So the 45% number is pretty meaningless.
I know you do taxes for a living, so let me give an example that relates to individual taxes (and so other people can understand this): Let’s say that I’m a teacher, and the government decides that they want to encourage teachers to teach in inner city schools, so they let me shelter half of my teaching income if I teach in downtown Detroit. If my income is $50,000 a year, I get to deduct 50% of that so my equivalent of Exxon’s “Income before taxes” is $25,000. If I pay 20% of that in taxes, I’ve paid $5,000 in taxes on $25,000 of income. But of course my income really was $50,000, so I am actually paying only 10% in taxes — which is my effective tax rate. The government is giving me $5,000 as a tax incentive.
Same thing with oil companies. We give billions of dollars in tax breaks to oil companies to “encourage” them to produce gasoline. And of course this is on top of the fact that all companies pay taxes on their profits, not on their income like people do (companies get to deduct all expenses, including employees, transportation, their buildings, utilities, interest on all loans, meals for employees, parties, lobbying, etc.)
Another way to look at this is that according to the federal government, it costs $30 total to produce a barrel of oil. So with oil selling for over $100 a barrel, the margins for oil companies is currently over 70% profit! 70% of Exxon’s 2010 income is $268,255 profit, on which they paid $21,561 in income taxes, which is an effective tax rate of 8% (not 45%).
These numbers are all approximate of course, but they are probably close. I’d have to look at their books (that is their real books, not the ones they show to the government and the public).
I’m also surprised that its numbers are in millions instead of billions.
I have to say in defense of its numbers it is in negotiation with countries all over the globe to get rights to oil in those countries.
Of course, it pays on the net. What business doesn’t? I deducted all my mileage, utilities, etc before my net on my business.
There will always be foreign taxes on oil companies. BP probably pays us a lot. The foreign tax are deductible against the US gov taxes.
My figures comes from the PriceWaterhouse audit. I’m still suspicious.
Eva, I was just pointing out something that you and I know, but many people do not realize. Individuals pay income taxes on their income, but corporations pay taxes only on their profits. Which of course is how it should be. If I’m a grocer and I buy oranges from a farmer for 50 cents a pound and sell them for a dollar a pound, I should only pay taxes on my profit.
Of course, individuals and families don’t make a profit in the same way that businesses do, so we tax people based on their income, not on their profits, but this is actually unfair to people. The tax code tries to make up for this with the standard deduction and exemptions for dependents, but this is grossly unfair to people with smaller incomes.
Families are in the “business” of providing the necessities of life to the family members (food, housing, health care, transportation, education, etc.). So the family equivalent of profits is how much money they have left over after paying for the necessities of life. Of course, rich people pay a much smaller percentage of their income for necessities, so they have significantly higher “profits” and thus should pay more in taxes. That’s why we have tax brackets that increase with income (despite attempts to institute a flat income tax). It approximates the desired solution, which would be to tax the money left over after necessities are paid for, which is impractical to implement.
So if I can summarize what your trying to say IK, we need to reform the tax code for individuals and corporations, yes? I concur, now how to achieve that. Good luck.
Well, actually, if we were suddenly able to reform taxes (as you say, good luck with that) I would make much bigger changes. We do a very silly thing with taxes — we tax things that we should be trying to encourage, and don’t tax things that we should be trying to discourage.
We want people to buy things, to be good consumers to keep our economy going, but then we tax buying things (sales tax). We want people to work, but we tax them when they do (income tax). We want to encourage businesses, but we tax their profits. Stupid stupid stupid. I’d get rid of all those taxes.
We do have taxes that aren’t stupid, like property taxes and inheritance taxes. If it were up to me, I’d make inheritance taxes as close to 100% as possible (with deductions, such as for surviving minor children or other dependents who cannot take care of themselves). Property taxes discourage people from hoarding land, so they encourage more efficient use of land. Actually, I would tax any hoarding or destruction of finite resources. Most of all, I would tax pollution or other destruction of the environment, or things that harm other people. Economists call them “externalities”.
Want an SUV that gets terrible gas milage and pollutes? No problem, but you’ll pay. We shouldn’t ban shower heads that waste water, or incandescent light bulbs, we should just tax them. We already give people and companies tax breaks for things we want to encourage, like investment, so this is just adding a stick along with the carrot. Tax things we want to discourage, and tax them hard.
And for heaven’s sake, how many bubbles do we have to survive before we put the brakes on speculators? Are we really that gullible?
I like your thought processes on the taxing issue. The hardest sell would be to the politicians especially the states and local municipalities who need all those taxes.
There would also need to be some amount of discussion on property taxes. Farm land, forest and agriculture conservations. Improved property vs unimproved. Property used for section 8 housing, and all those types would need to be discussed. I think sales taxes should not be taken off the table. The more you consume the more you pay, so it becomes IMO a more equal tax. You buy a luxury car you pay a luxury size tax, a small car a smaller tax.
We should probably devote a whole discussion just on this subject. I bet there are alot of good ideas out there from your contributers. We could each then email it to our representatives for brainstorming. Sorry there I go dreaming again.
You may be a dreamer, but you’re not the only one…
No, I would definitely get rid of sales taxes. We want people to consume things. I would put a tax on anything sold that has to be thrown away (like packaging) and on non-renewable resources consumed. And would definitely want a carbon tax!
Carbon tax is okay, but not cap and trade. Too much parasitic losses from traders on Wall Street and too easy to avoid. Carbon credits should NOT be traded.
2 Trackbacks/Pingbacks
[…] See this. Please Share / Save If you liked this, you might also like these related posts:Biting the Ass that Feeds You […]
[…] oil company executives say they don’t need. But what makes this hypocritical is that even the Republicans are saying that we should abolish these subsidies, but then keep voting for them. WTF? Watch as the same GOP politicians say they are against oil […]