Re: Tax Breaks

My response is long, so I’m creating another post.

1. Concerning the “tax breaks” given to big oil companies; this term used by the article, I think, is a misnomer. Despite the ridiculously voluminous size of the Federal Tax Code, the laws are not created for specific industries (as this CNN article has you assume.) Especially with Corporate Tax, the rules and regulations are wide sweeping across all industries. Believe it not, if Congress created tax laws for specific industries, the Tax Code would be 100 times larger and more complicated. I was hoping the article would specifically list the “tax breaks” given to the oil industry. But of course not, CNN has an agenda not to disseminate truth from emotions.
   As far as I know, the oil industry is extremely capital intensive… meaning that oil companies must invest huge amounts of money into tangible assets (known as Property, Plant, and Equipment.) So, to stay in business, the oil industry must continually use up to 70% of its revenue to keep the machines greased and running. This does not even take into account cost of new machines, construction of new assets, and Research and Development ( R&D). In contrast, the public accounting industry requires almost no hard capital (only office buildings and computers.)
2. The only argument that liberals might have is the ability of oil companies (and all companies operating in the US for that matter) is to deny the oil companies deductions for the huge amounts of R&D costs, thereby reducing “tax breaks.” Currently, any company can either deduct fully upfront R&D costs, or pro rate the deduction over a longer length of time. But, as Pat can tell you, denying these deductions is insane. The reasoning behind R&D deductions is to incent big business to find more efficient products. If Congress denies the ability of companies to deduct these monstrous costs, new natural resources will not be searched for. Instead, the oil companies will cease explorations and developing more efficient machinery in favor of controlling costs. What liberals fail to mention, or are totally ignorant of, is that the allowed deductions directly enable big oil companies to keep the price of oil/gas as low as possible. If the R&D deductions were to be stripped away tomorrow, the average Joe will probably have top pay close to $10 per gallon for gas. Liberals fail to recognize that the costs of their “compassionate” policies end up being paid for by all taxpayers. The minimum wage phenomenon is the perfect example of what will happen. It may sound good to raise wages for the common worker, but what is the result? Higher unemployment, decreased output, increased prices of all goods, etc. The same effect will be created by a windfall tax. I presume this to be flat tax based on profit, over and above the regular tax. The windfall tax will end up being paid by you and me, starving college graduates, at the gas pump. But as Jimmy Carter found out, artificially lowering the price of gas through regulation will only create shortages… a much more drastic problem than increased prices.
   
3. The oil industry and all other hard capital intensive industries, already suffer from the Alternative Minimum Tax (AMT) anyhow. The AMT is a recalculation of taxable income, different from the regular calculation. Generally, deductions are taken away from corporations. In addition, the calculation is such that capital intensive industries are punished more so than light capital industries. The AMT is sort of a “windfall tax” already in place.
4. In comparison to other industries, the oil industry is lagging when it comes to profiting. Of the oil company revenues, only 10% are retained as profits (the amount of revenues beyond costs) This 10% profit is kept only after Uncle Sam’s share of the pie, which is close to 18% of revenues (I heard these percentages on the Neil Boortz radio show.) Amazingly, the banking industry keeps close to 27% of revenues as profits… after taxes. Why aren’t liberals going after the banking industry? Because Democrats damn well know that a white collar worker with a large mortgage will probably never vote for a liberal. Liberals are taking this crusade against oil companies because their main voter base is directly affected by gas prices, even welfare recipients. (70% of US welfare recipients own cars, amazingly) Democrats always rely on emotional fears, they’ve been disparate for votes ever since Newt Gingrich was elected to office. But, this oil company crusade might work wonders for the Democrat Party. The average American is very uniformed of basic economics and tax laws. All they hear is the price of gas falling by a buck. I’m afraid the average Joes will vote more Democrats into office this time around. This might be good for Republicans to get their act together, because right now, the Republicans in office are no better than Cynthia McKinney.
5. The only way for the gas problem to be solved is to NOT to tax the oil industry at all, open up new oil refineries, allow more nuclear power plants to be built, and to allow more drilling sites. I’ve heard that the US has enough oil reserves to support its current consumption for 200 years or more. But, feel good hippie liberals would rather have that open 1/10 of mile wide stretch of Alaska prairie for the rare snow rat to prance about. Ridiculous.
6. CNN has failed to list the many obstacles Democrats have created to restrict the US’ ability to increase our natural resource supplies. Democrats are “having their cake and eating it too.” Liberals prevent us from increasing our supplies, and then punish the suppliers for following their orders. On top of all the “compassion” that Democrats invoke, the taxpayers will end up footing the bill of Liberal generosity.