tax breaks for big oil

[DaveinElma]

huh? not giving $4 billion per year is "punishment"? all other discretionary spending is aimed at those who "won't help themselves"? just so wrong i don't know where to start.

 

It's not giving. It's just not taking.

[birdog1960]

It's not giving. It's just not taking.

so we should do away with corporate taxes altogether? do you complain that so many lower echelon people in the US pay no taxes? you do realize that the logical end to your argument is no taxes at all. you really think that would end well?

[DC Tom]

No, I asked a leading question. It's only considered obnoxious if you don't like where it's leading. People (not just here) are arguing that we should continue to give billion dollar tax breaks to hugely profitable companies; primarily, because that will keep gas prices low. Well, why can't my business get large tax breaks. I'd pass the savings on to my customers.

 

No, it was obnoxious because you were trying to make a misguided and stupid point (see above) based in near-total ignorance.

 

Not that I'm that much less ignorant in this case (I don't know what the tax breaks were for...but at least I know I don't know, which puts me one up on your ignorant ass). But of the two of us, I'm not spouting off obnoxious and leading questions, am I?

[Dan]

No, it was obnoxious because you were trying to make a misguided and stupid point (see above) based in near-total ignorance.

 

Not that I'm that much less ignorant in this case (I don't know what the tax breaks were for...but at least I know I don't know, which puts me one up on your ignorant ass). But of the two of us, I'm not spouting off obnoxious and leading questions, am I?

No. You're just the one spouting off obnoxious retorts that are a far better representation of verbal diarrhea than my original question.

 

Yes my question was somewhat leading; however, it's really simple and shouldn't have brought out the response it has if someone has a rational answer. Joe Minor brought up a point, that's been brought up here and with pundits elsewhere; namely, that if we end the tax breaks the oil companies will raise the price of gas to compensate. Hence, we should continue giving them huge tax breaks. My question is simply to point out a fundamental flaw in that line of reasoning. All businesses pass all costs on to the end consumer. So, why don't we give all businesses big tax breaks? And that's not even to mention that while these companies have had this tax break; they've steadily raised the price of their goods. So, how much good is it really doing to help me at the pump?

[GG]

Well, are these really tax breaks, or are these codified deductions that the oil companies can take for accrued expenses on potential oil fields? I don't know. But it's ridiculous to see people who are clueless at accounting arguing accounting concepts.

[ExiledInIllinois]

No. You're just the one spouting off obnoxious retorts that are a far better representation of verbal diarrhea than my original question.

 

Yes my question was somewhat leading; however, it's really simple and shouldn't have brought out the response it has if someone has a rational answer. Joe Minor brought up a point, that's been brought up here and with pundits elsewhere; namely, that if we end the tax breaks the oil companies will raise the price of gas to compensate. Hence, we should continue giving them huge tax breaks. My question is simply to point out a fundamental flaw in that line of reasoning. All businesses pass all costs on to the end consumer. So, why don't we give all businesses big tax breaks? And that's not even to mention that while these companies have had this tax break; they've steadily raised the price of their goods. So, how much good is it really doing to help me at the pump?

 

 

I feel the same way Dan and agree. You know how I snap out of it. I tell myself that they don't want to help people out at the pump... They want nothing more than break people at the pump... But not break them too bad. You know why the companies get away with it? Because there is no other viable option for many people. When people are !@#$ed, the leeches know they can bleed them. It is called parasitism. The sad part is you see so many, otherwise "good people", defending this parasitism.

Edited May 19, 2011 by ExiledInIllinois

[birdog1960]

Well, are these really tax breaks, or are these codified deductions that the oil companies can take for accrued expenses on potential oil fields? I don't know. But it's ridiculous to see people who are clueless at accounting arguing accounting concepts.

maybe we're not as clueless as you assume. " There are several tax breaks available for oil and gas investors that are found nowhere else in the tax code". the defeated bill would not have touched small investors (who actually need very big bucks to play in a partnership). it was directly aimed at the big 5. here's the paint by number version

Edited May 19, 2011 by birdog1960

[Joe Miner]

Please don't spill your verbal diarrhea all over this discussion.

 

 

Sorry.. just asked a simple question. If you don't have an answer, a polite, I don't know would have sufficed.

 

 

Of course companies pass cost increases, as well as increased taxes, on to the consumer. But why should one set of businesses get breaks and incentives when others don't?

 

 

No, I asked a leading question. It's only considered obnoxious if you don't like where it's leading. People (not just here) are arguing that we should continue to give billion dollar tax breaks to hugely profitable companies; primarily, because that will keep gas prices low. Well, why can't my business get large tax breaks. I'd pass the savings on to my customers.

 

I'm just trying to understand why these few, greatly profitable companies continue to get nice tax breaks amounting to billions of dollars at a time when we're talking about cutting all sorts of programs to save millions of dollars from the budget. If the country is broke and needs to cut spending, I'd suggest we could also stop subsidizing highly profitable companies.

 

 

Is this more verbal diarrhea getting thrown all over this great thread? I'm confused. (no... i'm joking)

 

I don't pretend to understand this healthcare waiver business. But, I'd guess it's something in the law that allows them to file for waivers; they get reviewed and in some cases granted. If I don't want to pay my employees health care; I can file for a waiver as well (I assume) and hopefully get out of it. However, if I want to get a nice reduction in my taxes, I don't know of any waivers that I can fill out requesting that I not pay all my taxes.

 

In reference to your first set of questions:

yes. no. no. But, yes there may be plenty of reasons to give big oil specific tax breaks. I'm not suggesting they pay more. I'm suggesting that we currently have proposals on the table to end all sorts of tax breaks (like mortgage interest); yet we can't touch a break given to these guys? The expression, what's good for the goose is good for the gander comes to mind.

 

 

No. You're just the one spouting off obnoxious retorts that are a far better representation of verbal diarrhea than my original question.

 

Yes my question was somewhat leading; however, it's really simple and shouldn't have brought out the response it has if someone has a rational answer. Joe Minor brought up a point, that's been brought up here and with pundits elsewhere; namely, that if we end the tax breaks the oil companies will raise the price of gas to compensate. Hence, we should continue giving them huge tax breaks. My question is simply to point out a fundamental flaw in that line of reasoning. All businesses pass all costs on to the end consumer. So, why don't we give all businesses big tax breaks? And that's not even to mention that while these companies have had this tax break; they've steadily raised the price of their goods. So, how much good is it really doing to help me at the pump?

 

 

 

Dammit.

 

I even said please.

[GG]

maybe we're not as clueless as you assume. " There are several tax breaks available for oil and gas investors that are found nowhere else in the tax code". the defeated bill would not have touched small investors (who actually need very big bucks to play in a partnership). it was directly aimed at the big 5. here's the paint by number version

 

No, my assumption was correct.

 

The argument is whether the costs that the oil companies incur in drilling a well should be expensed or capitalized - hence this is an accounting discussion. The argument is not if the oil companies incurred those costs, but whether they should be fully expensed in that year or amortized over time. The expenses in question all relate to non-capital goods, so one can make a valid accounting argument that these are not capital expenses and should be deducted in the year incurred.

 

The punchline is that net effect on the taxes is equal only to the NPV of the payments, because the oil companies would get the same "tax break" but it would be recognized over a couple of years, instead of in one year.

 

OTOH, Saint Obama & Dems had no compunction in extending the bonus depreciation deductions, where companies can deduct the full cost of true capital equipment in year one. So yeah, the oil industry is somehow special.

 

Yup. Clueless.

Edited May 19, 2011 by GG

[DC Tom]

Yup. Clueless.

 

But they're so cute when they try to play grown-up.

[birdog1960]

No, my assumption was correct.

 

The argument is whether the costs that the oil companies incur in drilling a well should be expensed or capitalized - hence this is an accounting discussion. The argument is not if the oil companies incurred those costs, but whether they should be fully expensed in that year or amortized over time. The expenses in question all relate to non-capital goods, so one can make a valid accounting argument that these are not capital expenses and should be deducted in the year incurred.

 

The punchline is that net effect on the taxes is equal only to the NPV of the payments, because the oil companies would get the same "tax break" but it would be recognized over a couple of years, instead of in one year.

 

OTOH, Saint Obama & Dems had no compunction in extending the bonus depreciation deductions, where companies can deduct the full cost of true capital equipment in year one. So yeah, the oil industry is somehow special.

 

Yup. Clueless.

no. there is significant value to the oil companies in this little accounting question. it amounts to billions of dollars and is unique to the oil industry (as pointed out from the "small" investors perspective in the investopedia article. if it was only worth a trivial sum, would you expect to see the ceo's of the big 5 testifying before congress over this and then call in the markers on their republican stooges?

[GG]

no. there is significant value to the oil companies in this little accounting question. it amounts to billions of dollars and is unique to the oil industry (as pointed out from the "small" investors perspective in the investopedia article. if it was only worth a trivial sum, would you expect to see the ceo's of the big 5 testifying before congress over this and then call in the markers on their republican stooges?

 

Of course it's worth billions of dollars. Could it be because their expenses are in the billions of dollars? And those non-capital expenses also involve paying thousands of employees?

 

This is a non factor from a tax revenue standpoint, because the net NPV of the differences in the timing of those tax deductions is close to zero. (In other words, if the oil companies amortized those expenses over several years like you think they should, the total deduction would still be the same because you will have several years' worth of amortization that hits the books in a given year.)

 

I'm sure even you understand that six of one or one half dozen are the exact, same, equal things? But hey, it makes for a good political soundbyte for the clueless to glom onto.

[birdog1960]

Of course it's worth billions of dollars. Could it be because their expenses are in the billions of dollars? And those non-capital expenses also involve paying thousands of employees?

 

This is a non factor from a tax revenue standpoint, because the net NPV of the differences in the timing of those tax deductions is close to zero. (In other words, if the oil companies amortized those expenses over several years like you think they should, the total deduction would still be the same because you will have several years' worth of amortization that hits the books in a given year.)

 

I'm sure even you understand that six of one or one half dozen are the exact, same, equal things? But hey, it makes for a good political soundbyte for the clueless to glom onto.

and even an accountant understands the time value of money. with huge sums, that time value becomes quite large and will be even larger if inflation remains high. in the case of the govt, having the money in hand sooner also decreases borrowing costs (all discretionary govt spending is currently borrowed).

some country clubs accept new members for refundable deposits of $50000 or so. why do they do this? because they can invest all the deposits and if they're reasonably lucky, make 5% or more per year on them (that and it serves to keep the "riff raff" out). in this case, the oil companies = the country clubs and the individual taxpayers = the members. one gains the time value of money at the expense of the other.

[GG]

and even an accountant understands the time value of money. with huge sums, that time value becomes quite large and will be even larger if inflation remains high. in the case of the govt, having the money in hand sooner also decreases borrowing costs (all discretionary govt spending is currently borrowed).

some country clubs accept new members for refundable deposits of $50000 or so. why do they do this? because they can invest all the deposits and if they're reasonably lucky, make 5% or more per year on them (that and it serves to keep the "riff raff" out). in this case, the oil companies = the country clubs and the individual taxpayers = the members. one gains the time value of money at the expense of the other.

 

5 year Treasury - 1.8%

7 year Treasury - 2.5%

 

Do the math.

 

Also, since the deductions relate to new wells, by changing the tax effect, you raise the cost of drilling your own wells. So in the end, you increase the reliance on OPEC & Russia. Yeay, progress!!!

[birdog1960]

5 year Treasury - 1.8%

7 year Treasury - 2.5%

 

Do the math.

 

Also, since the deductions relate to new wells, by changing the tax effect, you raise the cost of drilling your own wells. So in the end, you increase the reliance on OPEC & Russia. Yeay, progress!!!

the math works out pretty well for the oil companies... you assume that the increase in the cost of drilling wells will make them unprofitable. if it's such a trivial sum, how could this be? you also assume that because these are american companies, they have the best interest of americans as a goal. really?

[GG]

the math works out pretty well for the oil companies... you assume that the increase in the cost of drilling wells will make them unprofitable. if it's such a trivial sum, how could this be? you also assume that because these are american companies, they have the best interest of americans as a goal. really?

 

Stop being dense.

 

The wells on their own will not become unprofitable. But each new well will be less profitable, which may be the decisive factor in drilling vs buying. And if your tax move reduces the expected profit, companies will be incentivized to raise prices to get that profit back. That doesn't even address the complexity that most large mega oil companies are not US-based, so let's add another layer of anti-competition.

 

Yeay, progressives!!

[Adam]

Why not lower the corporate tax, but eliminate some of the breaks?

[Gary M]

so we should do away with corporate taxes altogether? ?

 

See now we are getting somewhere!!

 

The government needs to be downsized.

[birdog1960]

 

Do the math.

 

Also, since the deductions relate to new wells, by changing the tax effect, you raise the cost of drilling your own wells. So in the end, you increase the reliance on OPEC & Russia. Yeay, progress!!!

interesting that you bring up russia. are they wiser than us in this matter? and YOU might want to do the math for big oils' roi in regards to republican senators.

[DC Tom]

interesting that you bring up russia. are they wiser than us in this matter?

 

Because all tax breaks and earnings are the same thing.