Kansas is represented on both sides of the congressional debate on what to do about high gas prices, and specifically a House-passed and Senate-blocked plan to rescind $18 billion in tax breaks for big oil companies.
“I don’t understand what some members of Congress tell their constituents,†Rep. Nancy Boyda, D-Topeka, told the Topeka Capital-Journal. “They send $18 billion to big oil when people are paying $3.45 for gas. Our farmers and businesspeople are getting hurt badly. Working people are struggling.â€
Countered Rep. Todd Tiahrt, R-Goddard, who voted against shifting the tax breaks to renewables: “Any tax increase that Congress imposes on the oil companies would only be paid for by consumers through boosted prices at the gas pump.â€
47 Comments
Isn’t there any competition in the oil business? The free enterprise system is supposely based on competition in a free enterprise system. I suspect all the layers of government are so much involved in the world-wide oil business that any semblance of competition is gone.
And same with the health business and most other businesses.
Best learn to walk.
Tiahrt gets a big ol’ big oil pat on the back.
Although I agree with Tiahrt that the oil companies would simply charge back to the consumer any tax breaks taken away, there has to be an alternative method to charge oil companies windfall profits tax that have been reeling in record profits the past few years.
“Any tax increase that Congress imposes on the oil companies would only be paid for by consumers through boosted prices at the gas pump.”
Oh there’s ways around that Toad!
I also like Senator Clinton’s idea for a gas tax holiday for the working man and everyone else. Slap a windfall profits tax on big oil!
Keep politics out of this. Markets will take care of oil like it always have in the past.
Do a little rumbling about nationalizing the oil companies.
Then watch them fall happily in line.
Did I miss something? One was talking about resending tax breaks, which means they are not paying the taxes that would normally be due. And the other is talking about increasing taxes which means adding to taxes that the company should already be paying.
That is somewhat fuzzy logic is it not? If you owe a dollar and I say you only have to pay seventy five cents. That is a break on what you owe, but if I then turn around and say you still have to pay the dollar. That is not an increase in what you owe, you owed the dollar in the first place!
But then the fuzzy logic continued, Tiahrt than said there has to be another way of getting to the profits.
I.E. another form of tax!
So where one is saying that the oil companies would be back to paying the level of normal taxes.
The other is wanting to increase the taxes on the oil companies! I guess I need to go back and read the piece over again. I thought that Tiahrt was Republican and Boyda is a Democrat?
I don;t see any need for the tax breaks, but I would like to know what they are, what they are for, and why they got them to start with. At the least, I want to know what they are.
Right, George.
Just like the markets took care of things in the 1930’s.
Sheesh.
And listen to Tobacco Todd: “Any tax increase that Congress imposes on the oil companies would only be paid for by consumers through boosted prices at the gas pump.”
So, taxpayers, some of whom don’t even drive like my son in Washington, DC, should subsidize people who drive a lot?
Welfare for the Hummer and Suburban owners.
Nice “free enterprise” there, Tiafarht.
What ARE the tax breaks?
Well, the most important one really isn’t a “break”
at all, but an acceleration in the deductability of expenses: Intangible Drilling Costs:
http://www.dpcusa.org/policy/pdf/070321.pdf
Think of this “break” as allowing oil companies to write off expenses quicker, rather than forcing oil exploration companies from spreading out that expense over several years.
If this was not allowed, oil companies would have much of their capital tied up in failed wells, from previous years.
As it applies to successful wells? The IRS gets paid on those wells, rather quickly!
This is not a “hand out” in any sense of the word. This tax law simply recognizes the huge amount of capital involved in drilling for oil, and the huge amount of risk.
The “deduction” or “loss” is not increased or decreased by this law.
The net profit, of the oil companies, is not increased or decreased, on each individual well.
This “IDC” tax law simply allows a more effecient marketplace for oil exploration, and allows more money to actually be placed in the exploration business, rather than forcing these business to carry “write offs” or “losses” on their books for several years.
Get rid of this tax accounting law, and you will reduce domestic production of oil.
By the way, Communists on this Blog: The oil companies all pay billions of dollars in taxes! The profits made by the large oil companies are justified and not out of line. Oil companies do NOT set the price of oil, anymore than a farmer sets the price for corn or wheat.
Also, most domestic production drilling companies are rather small organizations.
You will not find Exxon or BP doing very much exploratory drilling in the United States.
Getting rid of this tax accounting method means you are forcing small mom and pop drilling organizations to carry huge amounts of capital on the books, for several years, without being able to write off that expense, even on wells that fail to produce.
This will make it harder for these firms to finance drilling for more oil.
This will hurt the other mom and pop oil service companies, the small firms that go out and pick up the oil in trucks, from small wells that are not close to a pipeline.
Any change in existing law will do a huge amount of damage to small producers, will increase the price of oil and damage the economy.
“Any change in existing law will do a huge amount of damage to small producers, will increase the price of oil and damage the economy.”
Whereas, the current price of gasoline, has absolutely no effect on the ecnoomy what-so-ever!
Does anyone else wonder if Paul has any working brain cells?
Tiarht is right and Boyda is wrong. Boyda does not understand the economic fundamentals that require the price of a commodity to increase as supply is outpaced by demand.
Removing monetary incentives to build infrastructure to obtain new oil, only results in less exploration for new oil. Lower production causes futher price hikes.
Incidentally, we have not seen the worst of the price increases at the pump. The refiners have not been able to demand an adequate spread between what it costs for them to purchase the rising crude and what they receive from retail gas stations. Gasoline at the pump has not risen as much as crude, thus the refiners are getting squeezed. There is more room to run as soon as the consumer gets used to higher retail costs provided crude remains where it is at.
Some of the big names in refining are trying to shed unprofitable refineries to retain shareholder value. Eventually, the refiners will have to do the same as the airlines and consolidate to reduce capacity to force the “crack spreads” higher.
Steve seems to belong to the: “Do SOMETHING, even if it is WRONG” school of thought.
Current tax policy has helped to keep the price of oil and gasoline lower, in the United States, than it is in many other areas of the world.
The price of oil and gasoline are rising because you liberals will not let us drill for more oil and you liberals will not let us build more refineries.
Demand will always increase. You liberals have made it impossible for the economy to meet that demand, without raising prices.
While you attack the oil industry, which provides hundreds of thousands of jobs and pays billions of dollars in taxes, you completely ignore the fact that Al Gore has huge investments in “alternative energy” like ethanol. Al Gore can not make it, with his “investments” without huge government subsidies and hand outs:
http://www.foodandfuelamerica.com/2007/10/al-gore-saved-ethanol.html
Yet, you liberals attack an industry that only asks to be treated fairly, when profits and losses are calculated, so that they can keep their money invested in production of more oil!
50% of oil wells turn out to be “dry holes” — even with all of our modern technology.
You will be hard pressed to find another business that carries this much risk.
And, the oil industry is not asking for tax credits or rebates to consumers or to itself, like other “alternative” energy does.
The oil industry is only asking that they have THEIR OWN MONEY back, quickly, in the form of write offs, on failed wells.
Even then, they only “get” a deduction from their taxes on profitable wells and other income.
And, we are talking about SMALL producers, for the most part, that take advantage of these tax laws.
Let’s see - $18 billion in tax breaks or whatever you want to call them for Big Oil…… Tiahrt - gotta do it, good, good, good.
$7 billion to expand SCHIP….. Tiahrt - too expensive, can’t afford it, bad, bad, bad.
Hmmmmmmmmmmm………………… what am I missing?
How about lets quit subsidizing the oil companies for starters
“The price of oil and gasoline are rising because you liberals will not let us drill for more oil and you liberals will not let us build more refineries.”
How prevented the US from drilling off the coast of Florida in the Gulf?
Why, it was that evil liberal George Bush at the behest of his brother Jeb!!!!!
My, my, evil liberals.
If only we could mine lies for power…
“The price of oil and gasoline are rising because you liberals will not let us drill for more oil and you liberals will not let us build more refineries.”
THESE two are oft enough repeated to light the world!
The US has insignificant oil reserves and NO capacity to impact price.
And refineries? When WAS the last gas shortage? If we are short of refineries, why we SHOULD be seeing gas shortages shouldn’t we?
Actually, the deduction from IDC is from INCOME, therefore an IDC of $100,000.00 will NOT reduce your taxes by $100,000.00, but only reduce your taxes due on that amount, from other sources.
In other words, YOU STILL HAVE A LOSS!
If Uncle Sam is your “partner” on profits, —
Uncle Sam should ALSO be your “partner” on losses!!!
Why is that so hard to understand?
I also like Senator Clinton’s idea for a gas tax holiday for the working man and everyone else.
Have you seen the result of this plan? You would lose billions in road maintenance. How is that money going to be replaced. An $0.18 decrease in price will do nothing to help the working man over a three month period. The oil companies come out the big winners.
I am finding more and more, JR that you do not understand economics nor money. But you sure want to take other people’s money doncha?
Now you know that is not what I posted solie.
Not all of it anyway.
The half that you posted is Senator McCain’s plan. And you are right. It would result in neglect of our roads and bridges.
“How is that money going to be replaced?”
Why don’t you be honest and go back and get the other half of my post?
Tax the windfall of the oil companies. You know? The ones who have enjoyed record profits?
Tax the windfall of the oil companies. You know? The ones who have enjoyed record profits?
Exactly how are you going to word that legislation.
I wasn’t trying to post disinformation from your post, just the part that disturbed me.
The McCain/Clinton Gas Tax Holiday is a sham - it would only save the average family $28 over the summer. It would not encourage any conservation and have minimal impact on the household budgets of the working class while just tossing more billions into the deficit.
The McCain/Clinton plan is just window dressing - not much more than a photo-op for politicians looking to give the appearance that they care about Fred and Wilma.
They don’t.
Poor Exxon missed its quarter, but don’t despair still up 17% over last yrs. record profits!
Exxon profit disappoints even with record oil By Michael Erman
1 hour, 46 minutes ago
NEW YORK (Reuters) - Exxon Mobil Corp (XOM.N) on Thursday posted a $10.89 billion first-quarter profit but the results still disappointed investors as weak production and low refining margins took some steam out of profits from record-high crude prices.
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Despite missing estimates, Exxon’s earnings were up 17 percent year over year and the second-highest quarterly profit in U.S. history.
Benchmark U.S. oil prices averaged a record of nearly $98 a barrel during the quarter, up about 70 percent from a year earlier.
Exxon posted record earnings of $40.6 billion in 2007, with revenue higher than the gross domestic profit of Turkey, the world’s 17th largest economy. If oil prices stay above or around $100 for the remainder of 2008, the company could beat that mark.
Agreed WSClark My calculations based on my pattern of gas usage, about 9 dollars savings per month. It could save my summer vacation about $50 (a liberal estimate) in gasoline. I will take it if I can have it, but I am not really doing cartwheels over it.
And Exxon paid how much in taxes in 2007? 30 billion? Profit percentage was how much? 10%?.
Good news is consumer spending came in higher than expected, bad news is that it was the result of higher prices.
Boeing, Ford, and I suspect many major manufacturers would kill to have that kind of return. Believe boeing has been striving hard to reach double digit net profit, and ford is negative. But then they aren’t in the commodity business!
So the oil companies should lose money because Ford is? And Ford paid how much in taxes last year? Poor comparison, I think. So,what is your definition of an acceptable profit margin?
Tiahrt, who is sooooo big on being a fiscal conservative, and supports competition, figures that we should just be taxed to give money to the oil companies. We shouldn’t use that money to develop alternative energy because that might create a market where people have more choices.
It’s no big surprise that Tiahrt receives more in bribes, er campaign donations, from oil companies than the vast majority of people in the House. Tiahrt actually ranks fifth amongst House members in receiving money from oil companies:
http://www.opensecrets.org/industries/recips.asp?Ind=e01&cycle=2008&recipdetail=H&Mem=N&sortorder=U
No wonder he is opposed to removing those tax breaks, it may just hurt the amount of money he receives. And if he doesn’t get those donations, then he might have to pay for gas out of his own pocket like the rest of us.
Profit margins of Industry Week top 50 for 2007
http://www.industryweek.com/research/iw50best/2007/iw50Bestnames.asp
“Getting rid of this tax accounting method means you are forcing small mom and pop drilling organizations to carry huge amounts of capital on the books, for several years, without being able to write off that expense, even on wells that fail to produce.”
Mom and Pop enterprises like Exxon? The top five oil companies made profits of $123 billion. Cutting $18 billion out of that won’t affect them. And the tax bill rescinding those tax breaks would affect just those five companies:
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/27/AR2008022702635.html?hpid=topnews
So don’t worry about ma and pa working in Shell fields, their company is doing quite well.
It cost very little more today to pump a barrel of crude out of the ground, then it did when bush took office.
Enough profit gain to beat inflation, plus maybe a percent or two, should be adequate.
I am sorry but the claim that the tax incentives are needed to offset the cost of new drilling and exploration is nothing but a straw man argument. Look at the profit that is being made, how is that not a better incentive?
“Enough profit gain to beat inflation, plus maybe a percent or two, should be adequate.”
Why? Why should they be limited to the extent no other company in the US is? Exxon mobile profit margin for 2007 was about 10%. Last years average inflation rate was 2.85%. SO a 3.85 or 7.85 percent margin, lower than most of industry, should be the standard for the oil industry, according to you. Again, why? Other than not wanting to pay higher prices, why?
SXorry. 7.85 percent should have read 4.85 percent
As to why oil companies should be favored over other industries with tax breaks, one need look no further than Resident Gush, and his point man, Derrick Cheney.
It’s probably true that the oil companies would respond to such a government action by increasing prices at the pump. They also have other means of retaliating. Thus is requires both political skill and considerable clout to tangle with them.
This requires, very roughly speaking, to encourage actions good for America and discourage those which are bad. To do this right means actually using government, i.e. targeted policies, perhaps grants that are budgeted for and accountable to the taxpayers. With the current deficits, using tax policy to do that–i.e. just blanket forfeiting of revenue–is just irresponsible, period.
The exploration costs to get the average barrel of oil out of the ground today are much higher than in years past because of geology. The cheap oil is on tap and much as been pumped out. To replace it means finding new reserves. The unavailability of cheap oil means reverting to “oil sands” technology, drilling in environmentally sensitive areas, drilling in mile deep ocean water, etc. Such means of getting oil to the consmer were not considered as necessary even one decade ago.
To add to the technological problems with drilling for oil, you need an areas with political stability. For example, If countries like Nigeria could quell the rebel uprising, there would be more oil from those conventional oil fields.
If the consumer is willing the pay for oil at the price it takes to get it, the explorers will continue to stretch the limits of technology (and commercial diplomacy) to go out and get it.
Without big profits, oil companies would prepare for a downsizing and stop exploring. Again, generally speaking, more profit to the oil companies today yields more supply to the consumer tomorrow.
However, with peak oil here, do we really want to continue our dependence on oil? Do we really need to spend more money building and repairing roads when Americans will doubtless be driving less as time goes on?
“As to why oil companies should be favored over other industries with tax breaks, one need look no further than Resident Gush, and his point man, Derrick Cheney.”
As I understand it, the tax break that would be rescinded, applies to all manufacturers now. So, in fact, they are not being favored above other industries, but under the proposal, would be treated more harshly.
Maggot
By what weird logic do you claim that the United States taxpayers “give” money to the oil companies?
That is not true.
You do not know what you are talking about.
Maggot, you IDIOT, read and study this issue, would you?
Exxon does NOT produce that much oil, domestically. A very large portion of what Exxon sells, in the United States, was produced elsewhere.
Especially in Kansas, oil production is a much smaller operation.
The point of the tax laws is not to “subsidize” anyone, where oil exploration is concerned.
The point is to allow gains to be immediately offset by losses, in order to allow more money to be available for exploration.
In the end, total profits and total losses are not effected by these tax laws.
Companies are just allowed to “balance” the two, a great deal quicker, with the IDC rules.
As I understand it, the tax break that would be rescinded, applies to all manufacturers now. So, in fact, they are not being favored above other industries, but under the proposal, would be treated more harshly.
Haven’t looked at the specifics, but let’s say you’re right. Are the oils companies being treated unfairly then?
Well, the thing that bothers me is, while they big producers continued to haul in billions of profit, the prices kept going up. How is this? The law of supply and demand, of course. But it also showed that they didn’t need to raise prices to make a healthy profit.
A lassez-faire perspective might say “So what?—that’s business!”. . . but there’s a problem. For most people in America, using oil is as neccessary as breathing. People may drive less , yes, but commuting to work, shopping for groceries, etc. are not optional things. Hence the natural market corrective–less consumption–is out of synch with thr price rise. People pay thru the noise because they have no choice .
And also: I bet if you correlated supply/demand with the price hikes, you find, quite naturally, that price increases have far exceeded what one would expect.
Bottom line: Big Oil is gouging America, and getting away with it.
Franklin has a rather distorted view of oil. Its price IS politically controlled, and not market driven. Anyone familiar with OPEC should realize that.
Also, the cost of drilling non-productive wells is built into the cost of doing business. The oil companies would have to be really stupid to think all wells drilled will be productive. For the government to subsidize that cost for the companies is rather stupid as well.
Lets take that a bit further: Joe Blow invents a widget, markets it, and it fails. He asks the government to subsidize his loss, and keeps doing this, with a 50% failure rate, paid for by Uncle Sam. Kinda takes the business side right out of the equation, and inserts welfare. Kind of what we have with oil companies now.
My guess is if big oil were cut off from the welfare, they would far less failed drillings, and more productive ones. After all, if it’s your money . . .
Rage: I think the laws of supply and demand has been prostituted by ubercapitalists. They can now manipulate the supply (Enron)and raise costs regardless of the demand. If the demand is there, then they revert to the axiom that is now used a crutch to explain greed rather than the expected occurances we took in Econ 101(where is he anyway, is he Nathaniel?) Since NAFTA, and adjusted for inflation, the bottom 20% of the income scale has seen real wages drop by 16%, the middle range drop by 2% and the top 20%, increase by 20%. The big problem is that the lower strata contains many, many more souls than ever before, depopulating the the middle range and applies to Canada and the US. Mexico apparently has it much worse. Guess in which income range, live the ubercapitalists?
Profits for oil companies is only 10%.
Want to take a guess on what the profit percentage of Quik Trip is?
How about Nike, they pay their employees in Vietnam, 59.00 a month. Gee I wonder what kind of profit percentage Nike has?
It is supply and demand people. Like I’ve said before, I have a 70 mile round trip commute each day. I drive on the interstate most of that trip. I drive 55. This has increased my MPG from 38 to 43.
And yet I still see big ol SUV’s and others passing me at 70-75 MPH. If you won’t even get up 10 minutes earlier to head to work and slow down to 55 just to save your OWN pocketbook, then you still have to much money to be pissing away, so I say keep raising the prices. My 401K has oil investments, so just keep on speeding you morons.
And yes, postponing the tax for the summer is an idiot idea, no matter who came up with it.
“Exxon does NOT produce that much oil, domestically. A very large portion of what Exxon sells, in the United States, was produced elsewhere.
Especially in Kansas, oil production is a much smaller operation.
The point of the tax laws is not to “subsidize” anyone, where oil exploration is concerned.”
Oh, so your argument is that the companies aren’t receiving tax breaks. That’s nice, then there won’t be an issue concerning removing these tax breaks.
These mom and pop shops that operate internationally, how many of those are there? You know, the ones you claimed will be affected by the change in the tax rules? How many wells in Kuwait or Nigeria does ma and pa Kettle from Russell, KS have over there?
It’s nice that you contradict yourself. If the companies get their oil from elsewhere then there is no argument that the subsidies are needed to create jobs in America. The companies are receiving record profits so the argument can’t be that they need the tax breaks or else they’ll go belly up. So what is the reason for the subsidies exactly?
“The point is to allow gains to be immediately offset by losses, in order to allow more money to be available for exploration.”
Oh, so the companies are suffering financially and need the $18 billion dollars or they’d just go bankrupt because they can’t draw that $18 billion from their $123 billion in profits.
Let’s use Paul’s reasoning. I want to be in hula-hoop selling business. I know I’ll be big so I’ll buy a million hula-hoops. I should get a tax break from the government in order to offset any potential loses. Therefore I’ll get the hula-hoops at a discount which will put me at an advantage against my competition that do not get government subsidies. I can call this the free market system.
Sorry Pauly, you are clueless about the issue. You were clueless about who would have their subsidies removed so why should I believe that you are suddenly knowledgeable about the subject now?
““They send $18 billion to big oil”
Nancy Boyda is trying to feel your pain. She is appealing to the masses. But she is history. She failed in Congress, just like Jim Ryun.
They didn’t send anyone any money. The editor acts as if a private corporations earnings “belong” to the government. Good grief, how far have we come?
Tax breaks for exploration and improvements - go ahead take them away.
In this difficult time for most Americans with the rising price of gas, why is it that no one is calling for these corporate oil companies to be patriotic AMERICAN companies and voluntarily decrease their profits until the country can come up with an alternative fuel source?
I know, I know - it is the shareholders that will not allow that. The entire house of cards is built on greed - corporate and shareholders - even at the expense of the rest of their countrymen.
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[...] Rhonda Holman wrote an interesting post today on Divided about oil company tax breaksHere’s a quick excerptKansas is represented on both sides of the congressional debate on what to do about high gas prices, and specifically a House-passed and Senate-blocked plan to rescind $18 billion in tax breaks for big oil companies. … [...]
[...] BlueJay wrote an interesting post today on Comment on Divided about oil company tax breaks by BlueJayHere’s a quick excerptAnd you are right. It would result in neglect of our roads and bridges. “How is that money going to be replaced?” Why don’t you be honest and go back and get the other half of my post? Tax the windfall of the oil companies. You know? … [...]
[...] WSClark wrote an interesting post today on Comment on Divided about oil company tax breaks by WSClarkHere’s a quick excerptThe McCain/Clinton Gas Tax Holiday is a sham - it would only save the average family $28 over the summer. It would not encourage any conservation and have minimal impact on the household budgets of the working class while just tossing … [...]
[...] Tax » Comment on Divided about oil company tax breaks by WSClark wrote an interesting post today on Comment on Divided about oil company tax breaks by Tax » Comment …Here’s a quick excerptWSClark wrote an interesting post today on Comment on Divided about oil company tax breaks by WSClarkHere’sa quick excerptThe McCain/Clinton Gas Tax Holiday is a sham - it would only save the average family $28 over the summer. … [...]