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Texan
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 Posted: Fri May 02, 2008 8:45 am Post subject: Windfall Profits Tax Has NEVER Worked |
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Clinton Caught in Time Warp With Windfall Oil Tax: Amity Shlaes
Commentary by Amity Shlaes
May 2 (Bloomberg) -- Jimmy Carter's in the news again. The former president wants a windfall-profits tax. No wait, he wants the U.S. to recognize Hamas. Hillary Clinton is the one who wants a windfall-profits tax.
It seems that every year, usually just around the time Memorial Day comes into view, a politician demands a tax on oil profits. Richard Nixon's economists offered one up in 1973, arguing, almost vindictively, that they were justified in imposing a stiff levy because the tax would ``make up in some degree for windfalls which have occurred in the past.''
Carter proposed one in 1977, saying his administration ``will ask private companies to sacrifice just as private citizens do.'' A few years ago Senator Charles Schumer of New York put forward a tax in the name of funding a $100-per-family income tax credit.
Senator Clinton has couched her support in terms of the hunt for revenue: ``I'm the only one with a plan,'' she said earlier this week. And lots of other Americans, not just Democrats, are eager for a break at the pump.
What to make of it? Insanity has been defined as doing the same thing over and over again, and each time expecting a different result. By this definition, a new windfall-profits tax would suggest a sort of collective insanity. For, as our country's history with the great Windfall-Profit Tax of 1980 amply demonstrates, there are lots of reasons to oppose it.
Not Much Revenue
The first is that such taxes tend to yield disappointing revenue. Back in 1980, lawmakers were riled over the news of Arab Light hitting $36 a barrel, up from just $14 in 1978.
Congress, the world's worst economic forecaster, began to envision an endless increase in the price of oil and an endless gusher of revenue. Lawmakers imposed a levy of as much as 70 percent based on a per-barrel increase over a designated base price.
Carter wasn't necessarily comfortable with the recent ending of price controls. And he knew that Mobil Oil Corp. and other oil companies were excited about future discoveries.
Now he consoled himself with the thought that this windfall tax would take the profit of such discoveries from such irritating petrocrats.
Of course, oil prices didn't surge -- in fact, they dropped. There was something at work that lawmakers hadn't thought of. The oil-price increases had been partly a monetary event, reflecting the inflation that the new Federal Reserve Chairman, Paul Volcker, was then vanquishing.
Quiet Death
Some would argue that inflation plays the same role in goosing commodity futures prices today. By 1986 oil prices had collapsed. Disappointing windfall tax revenue reflected that.
At the Cato Institute, authors Jerry Taylor and Peter van Doren reckon that the windfall profits tax generated $40 billion or so, instead of the $175 billion once projected. By 1988, embarrassed lawmakers allowed the tax to die a quiet death.
But in the course of its life, the tax did plenty of damage. As a Congressional Budget Office paper from 1983 pointed out, the levy early on proved itself an administrative nightmare since it effectively required the collection of ``detailed information on each individual oil-producing property in the United States.''
What's more, the tax so depressed business activity that it had an effect on the general economy.
Experts Baffled
But in 1980 the economy's refusal to recover was baffling some economists. One of their conclusions, published in the New York Times, was that the windfall-profits tax was being passed along to consumers, reducing disposable income and so demand. In other words, it was doing the opposite of what the tax-rebate checks are supposed to be doing this month and next.
Specifically, the Windfall Tax made investment and production at domestic oil companies more expensive. Mobil was right. You needed incentives to want to drill. That deterrent slowed the sort of research that might have made energy less expensive earlier.
A Congressional Research Service paper suggested that the 1980 law actually increased foreign imports relative to domestic production.
So where we are now is that Clinton and her colleagues are backing a move that would strengthen the position of Middle Eastern OPEC members and Hugo Chavez of Venezuela.
No Free Trade
That's certainly consistent with her perverse refusal to help save Colombia from the arms of Hugo by rejecting the Colombian-American free trade agreement. But it's not exactly a position that leads to U.S. energy independence or suits our country's green ambitions.
Clinton argues that the windfall tax is valuable because it will subsidize a summer gas tax holiday for drivers. Senator John McCain, the presumptive Republican presidential nominee, has also endorsed a gas tax holiday. Such a break will feel good, but like the windfall tax, may prove counterproductive.
As economists such as Harvard's Greg Mankiw have pointed out, if you want domestic innovation, it would make more sense at this point to raise the gas tax and let the companies keep the rest of their resources. Then they would work on green technology. And of course, do the most important thing of all: drill.
All these missteps by his opponents actually leave Senator Barack Obama looking pretty good. He commented recently on the gas tax holiday, saying ``this isn't an idea designed to get you through the summer. It's designed to get you through the election.''
He's right. In her energy plans, Clinton believes she's found a political windfall. But those plans are so poorly crafted they may prove to be what wipes her out.
(Amity Shlaes, a senior fellow at the Council on Foreign Relations in economic history, is a Bloomberg News columnist. The opinions expressed are her own.)
http://www.bloomberg.com/apps/news?pid=20601039&sid=ae8vDjPHG6vY&refer=columnist_shlaes
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TSR
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Joined: 27 Apr 2005
Posts: 1580
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| Posted: Fri May 02, 2008 1:38 pm Post subject: Re: Windfall Profits Tax Has NEVER Worked |
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| Texan wrote: |
Clinton Caught in Time Warp With Windfall Oil Tax: Amity Shlaes
Commentary by Amity Shlaes
May 2 (Bloomberg) -- Jimmy Carter's in the news again. The former president wants a windfall-profits tax. No wait, he wants the U.S. to recognize Hamas. Hillary Clinton is the one who wants a windfall-profits tax.
It seems that every year, usually just around the time Memorial Day comes into view, a politician demands a tax on oil profits. Richard Nixon's economists offered one up in 1973, arguing, almost vindictively, that they were justified in imposing a stiff levy because the tax would ``make up in some degree for windfalls which have occurred in the past.''
Carter proposed one in 1977, saying his administration ``will ask private companies to sacrifice just as private citizens do.'' A few years ago Senator Charles Schumer of New York put forward a tax in the name of funding a $100-per-family income tax credit.
Senator Clinton has couched her support in terms of the hunt for revenue: ``I'm the only one with a plan,'' she said earlier this week. And lots of other Americans, not just Democrats, are eager for a break at the pump.
What to make of it? Insanity has been defined as doing the same thing over and over again, and each time expecting a different result. By this definition, a new windfall-profits tax would suggest a sort of collective insanity. For, as our country's history with the great Windfall-Profit Tax of 1980 amply demonstrates, there are lots of reasons to oppose it.
Not Much Revenue
The first is that such taxes tend to yield disappointing revenue. Back in 1980, lawmakers were riled over the news of Arab Light hitting $36 a barrel, up from just $14 in 1978.
Congress, the world's worst economic forecaster, began to envision an endless increase in the price of oil and an endless gusher of revenue. Lawmakers imposed a levy of as much as 70 percent based on a per-barrel increase over a designated base price.
Carter wasn't necessarily comfortable with the recent ending of price controls. And he knew that Mobil Oil Corp. and other oil companies were excited about future discoveries.
Now he consoled himself with the thought that this windfall tax would take the profit of such discoveries from such irritating petrocrats.
Of course, oil prices didn't surge -- in fact, they dropped. There was something at work that lawmakers hadn't thought of. The oil-price increases had been partly a monetary event, reflecting the inflation that the new Federal Reserve Chairman, Paul Volcker, was then vanquishing.
Quiet Death
Some would argue that inflation plays the same role in goosing commodity futures prices today. By 1986 oil prices had collapsed. Disappointing windfall tax revenue reflected that.
At the Cato Institute, authors Jerry Taylor and Peter van Doren reckon that the windfall profits tax generated $40 billion or so, instead of the $175 billion once projected. By 1988, embarrassed lawmakers allowed the tax to die a quiet death.
But in the course of its life, the tax did plenty of damage. As a Congressional Budget Office paper from 1983 pointed out, the levy early on proved itself an administrative nightmare since it effectively required the collection of ``detailed information on each individual oil-producing property in the United States.''
What's more, the tax so depressed business activity that it had an effect on the general economy.
Experts Baffled
But in 1980 the economy's refusal to recover was baffling some economists. One of their conclusions, published in the New York Times, was that the windfall-profits tax was being passed along to consumers, reducing disposable income and so demand. In other words, it was doing the opposite of what the tax-rebate checks are supposed to be doing this month and next.
Specifically, the Windfall Tax made investment and production at domestic oil companies more expensive. Mobil was right. You needed incentives to want to drill. That deterrent slowed the sort of research that might have made energy less expensive earlier.
A Congressional Research Service paper suggested that the 1980 law actually increased foreign imports relative to domestic production.
So where we are now is that Clinton and her colleagues are backing a move that would strengthen the position of Middle Eastern OPEC members and Hugo Chavez of Venezuela.
No Free Trade
That's certainly consistent with her perverse refusal to help save Colombia from the arms of Hugo by rejecting the Colombian-American free trade agreement. But it's not exactly a position that leads to U.S. energy independence or suits our country's green ambitions.
Clinton argues that the windfall tax is valuable because it will subsidize a summer gas tax holiday for drivers. Senator John McCain, the presumptive Republican presidential nominee, has also endorsed a gas tax holiday. Such a break will feel good, but like the windfall tax, may prove counterproductive.
As economists such as Harvard's Greg Mankiw have pointed out, if you want domestic innovation, it would make more sense at this point to raise the gas tax and let the companies keep the rest of their resources. Then they would work on green technology. And of course, do the most important thing of all: drill.
All these missteps by his opponents actually leave Senator Barack Obama looking pretty good. He commented recently on the gas tax holiday, saying ``this isn't an idea designed to get you through the summer. It's designed to get you through the election.''
He's right. In her energy plans, Clinton believes she's found a political windfall. But those plans are so poorly crafted they may prove to be what wipes her out.
(Amity Shlaes, a senior fellow at the Council on Foreign Relations in economic history, is a Bloomberg News columnist. The opinions expressed are her own.)
http://www.bloomberg.com/apps/news?pid=20601039&sid=ae8vDjPHG6vY&refer=columnist_shlaes |
Since we don't know the details of these windfall tax proposals,how about a windfall tax just on the profits that aren't being used to further our energy independence? Or should we just trust these corporations to do the right thing? They have in the past haven't they-more profit than at any time in history (profit that came from whom, certainly not consumers  ) . Not to mention the tax breaks they supposedly are already getting. I mean something has got to give, I don't want to see any of my tax money going to a corporation that has made more profit than any in the history of the world can give its retiring ceo 400 million in severance and no telling what kind of pension and they are still getting tax breaks from our government. Give me a break!
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Texan
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Joined: 10 Feb 2005
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| Posted: Fri May 02, 2008 7:44 pm Post subject: |
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You whining ass liberals beat all I ever saw. I'm grateful for the opportunity to buy gasoline at four bucks. Beats the hell out of walking and plowing with mules. Gas was underpriced for WAY too long and nobody cared then.
As long as selfish Americans could drive what they wanted and go everywhere they wanted to go, they were all too happy to burn gas like they stole it - which they effectively did. Now it's time to pay the fiddler.
ExxonMobil has averaged paying $27,000,000,000 in taxes over the last three years. Twenty seven f'ing BILLION dollars. But that's not enough for some of you whiners, is it?
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Texan
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| Posted: Fri May 02, 2008 7:49 pm Post subject: |
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Exxon: Profit Pirate or Tax Victim?
The oil giant paid $9.3 billion, or 49% of its first-quarter gross income, in income taxes. Is that enough? Depends on who you talk to
by Moira Herbst
With gas prices averaging $3.63 a gallon, consumers understandably aren't cheering Exxon Mobil's latest profit report. On May 1, Exxon Mobil announced first-quarter 2008 earnings of $10.9 billion—a figure that marks the second-largest U.S. quarterly profit ever, even if it slightly missed Wall Street's expectations.
Perhaps more surprising was this figure buried in the Exxon (XOM) report: $9.3 billion. That's how much Exxon paid in worldwide income taxes in the first quarter of 2008, representing a 49% tax rate on its gross income of $20.2 billion. While not generating as much heat as the income figure—which prompted Senator Hillary Clinton (D-N.Y.) to call once again for tax hikes on oil profits—it did prompt a vigorous discussion in the blogosphere.
Blogger and economist Mark Perry generated a lively discussion when he pointed to Exxon's "all-time high" income-tax figure, noting it was a small portion of the company's overall $29.3 billion total tax payments in the quarter. In Exxon's defense, a commenter IDed as "Buy It Cheap" wrote, "These are relatively small profit margins. One should note that the federal and state governments that tack on their percentage 'profited' the most from every gallon of gas sold all the way along the value chain, without a modicum of risk."
Paying Dearly to Drill
So should the conversation shift from Exxon, profit pirate, to Exxon, tax victim? It depends which side of the number you're on. "Our industry is one of the most heavily taxed in the world," says Gantt Walton, an Exxon spokesman. "While our worldwide profits have grown, our worldwide income taxes have grown even more." Walton says.
From 2003 to 2007, Exxon's earnings grew by 89%, while income taxes grew by 170%. Much of that growth was overseas. Oil-producing countries charge companies like Exxon dearly to dig for oil. Arrangements vary from country to country, but Russia and Libya charge companies up to 90% of the revenues they collect for extracting oil, according to Fadel Gheit, senior analyst for Oppenheimer (OPY). These arrangements—whether production share agreements or royalty contracts—are not disclosed by companies and governments.
In tax terms, the U.S. government is kinder to oil companies. According to Securities & Exchange Commission filings, Exxon paid an effective tax rate of 34% to the U.S. government in 2007, or $5.12 billion. While cheaper than rates from some foreign governments, it's still a higher rate than many U.S. companies pay. A BusinessWeek collaboration with Capital IQ in December, 2007, found that the average percentage of earnings spent on taxes by companies that make up the Standard & Poor's 500-stock index was 26%, well under the 35% official U.S. corporate income-tax rate. Companies achieved lower taxes in a variety of ways, from taking advantage of lower tax rates abroad to benefiting from industry-specific breaks.
Industry-Specific Tax Breaks
However, Exxon's critics point out that its stated tax rate doesn't reflect a number of deductions and tax breaks that are afforded the oil and gas industry in the U.S. Erich Pica, a spokesman for the environmental group Friends of the Earth, says the U.S. federal tax code contains more than $17 billion in breaks to benefit the oil and gas industry for fiscal years 2007-11.
That $17 billion is made up mainly of tax breaks newly offered or extended in the Energy Policy Act of 2005, including a "percentage depletion allowance" that allows oil companies to deduct 15% of their sales revenue, to reflect the declining value of their investment, and 70% of their drilling costs.
Additionally, oil and gas companies pay reduced royalty fees on products they recover from federally owned waters, which Pica says could cost taxpayers $65 billion over five years.
Politicians and Environmental Groups Take Aim
With energy prices spiking and inflation rising across the U.S. economy, the notion that energy companies pay too much in taxes isn't likely to win over the public or to play well on the campaign trail. Indeed, on May 1, Clinton took the opportunity to promote her plan to have oil companies foot consumers' bill for the federal gas tax this summer. "There is something seriously wrong with our economy when Exxon's record $11 billion in quarterly profits are seen as a disappointment by Wall Street," said Clinton. "This is truly Dick Cheney's wonderland."
Environmental groups are also mobilizing to target the oil and gas industry. "We don't think oil companies are paying enough taxes," says Josh Dorner, a spokesman for the Sierra Club. "There are literally billions of dollars in subsidies and giveaways and misguided regulatory schemes. Politicians have chosen Big Oil before clean energy and their constituents."
The debate over whether Big Oil pays too much or too little is taking place alongside a battle for government resources between conventional and renewable energies. When Congress passed the 2007 energy bill in December, it kept tax credits for oil and gas companies while allowing those for wind and solar power to expire this year. Democrats, including House Speaker Nancy Pelosi (Calif.), are now pushing for the Renewable Energy & Energy Conservation Tax Act (HR 5351), which would repeal $18 billion in tax subsidies for large oil and gas companies.
Here, there's little surprise: Exxon opposes the legislation, while environmental groups are backing it.
Herbst is a reporter for BusinessWeek.com in New York.
http://www.businessweek.com/bwdaily/dnflash/content/may2008/db2008051_
596535.htm?chan=rss_topEmailedStories_ssi_5
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Oldtimer
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loomixguy
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nonothing
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| Posted: Sat May 03, 2008 12:09 am Post subject: |
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| Texan wrote: |
You whining ass liberals beat all I ever saw. I'm grateful for the opportunity to buy gasoline at four bucks. Beats the hell out of walking and plowing with mules. Gas was underpriced for WAY too long and nobody cared then.
As long as selfish Americans could drive what they wanted and go everywhere they wanted to go, they were all too happy to burn gas like they stole it - which they effectively did. Now it's time to pay the fiddler.
ExxonMobil has averaged paying $27,000,000,000 in taxes over the last three years. Twenty seven f'ing BILLION dollars. But that's not enough for some of you whiners, is it? |
If your claim is that gas was under priced,and if what you say is true,then every single product transported by truck,train or Air plane we have been stealing too..Your claim means we should not only expect a 50% rise in fuel prices but also we should expect a similar rise in all commodities that require fuel to move them.....
Do you realize how many transport trucks are no longer on the road shipping product,just because of high fuel prices..fuel for planes is rising,ships transorting products world wide are feeling the fuel prices...
We have an economy based on transportation.if no company can make transportation costs,then it will halt movement..If you think we were stealing to drive,wait till you see how much we were stealing just to eat...
Until goverments stop bowing to the oil industry and start looking at better ways to transport without the sole use of gas ..We will always be at the oilmans mercy..
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hypocritexposer
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| Posted: Sat May 03, 2008 2:00 am Post subject: |
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I think most of us confuse profits in oil vs. profits on gas. I realize they are connected, but not exactly the same.
Companies such as Exxon buy a majority of their oil (@ world price), to refine into gas/diesel etc.
Supply of oil may have reached peak, or close to it, so it is demand that is raising price. I think we as North Americans have got to realize that we are now competing with developing nations(china) for oil.
As for ANWAR, estimates I have seen of quantities, would provide about a year's worth. But they won't know what's there for sure, until they start drilling. Better get at it right away, I think it would take quite a few years until it was having any effect on prices of gas.
OPEC is forecasting prices of $200/barrel by 2010 (?),
Last edited by hypocritexposer on Sat May 03, 2008 7:02 am; edited 1 time in total |
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hypocritexposer
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| Posted: Sat May 03, 2008 3:47 am Post subject: |
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| Quote: |
| The spending increase is indicative of a fundamental shift affecting the entire industry. According to research from Deutsche Bank, oil companies spent a combined $250bn to produce 30 million barrels of oil per day in 2002. By 2006, the industry spent $550bn to get just 20m barrels per day. While part of that change can be explained by cost inflation, the fundamental reason is that most of the easy oil – close to the surface and relatively straightforward to extract– has been found. |
http://www.independent.co.uk/news/business/analysis-and-features/oil-fields-of-plenty-776776.html
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Texan
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aplusmnt
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| Posted: Sat May 03, 2008 9:10 am Post subject: |
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| Texan wrote: |
ExxonMobil has averaged paying $27,000,000,000 in taxes over the last three years. Twenty seven f'ing BILLION dollars. But that's not enough for some of you whiners, is it? |
Don't forget the Billions of dollars that their high paid employees have paid in taxes and added to the economy. How many people have oil stocks in their retirement plans.
Liberals think taking away from oil companies will only hurt the CEO and Higher ups, well these guys will still make the same money as ever, it will be the lower guys and America that will be hurt.
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