Editore"s Note
Tilting at Windmills

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July 4, 2010

PUTTING OIL INDUSTRY SUBSIDIES ON THE TABLE.... Under the circumstances, it's tempting to think Congress wouldn't have too much trouble ending breaks for the oil industry -- energy giants have enjoyed remarkable generosity for quite a while.

[A]n examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.

According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.

And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by various credits. These companies' returns on those investments are often higher after taxes than before.

"The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant," said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. "There is no reason for these corporations to shortchange the American taxpayer."

The Center for American Progress' Sima J. Gandhi told the NYT, "We're giving tax breaks to highly profitable companies to do what they would be doing anyway. That's not an incentive; that's a giveaway."

The report added, however, "Despite the public anger at the gulf spill, it is far from certain that Congress will eliminate the tax breaks."

It didn't say which party will be pushing to protect the oil industry, but it's not a stretch to suspect Republicans will play their traditional role.

Steve Benen 9:45 AM Permalink | Trackbacks | Comments (10)

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Comments

McConnell wants the be able to pass the unemployment extension, but only if we can do it in a way that won't add to the deficit. Let's see if he means it.

Posted by: Danp on July 4, 2010 at 10:01 AM | PERMALINK

"There is no reason for these corporations to shortchange the American taxpayer."

I think they're finally getting it.

Posted by: citizen_pain on July 4, 2010 at 10:09 AM | PERMALINK

See, this is where you lose me Bennen, I agree we should cut all tax breaks to big companies. I do not see why the taxpayers should pay to expand broadband coverage that those same big companies have failed to expand. The fall of large companies are opportunities for smaller companies to grow and hire other workers in a free market society. These tax breaks and subsidies only keep lethargic top heavy companies in place and restrict workers who have skills and experience from getting better job offers from growing companies. The need and want for the goods and services rarely goes away unless it is replaced by a better service or product like newspapers and magazines.

If we have to help people in the snow belt heat their homes due to lack of GAINFUL employment then those tax breaks should go directly to the consumer.

Posted by: Fed Up and Tired on July 4, 2010 at 10:54 AM | PERMALINK

If Republicans, aka Teabaggers, want to assert "free market" principles, they need to suggest cutting all subsidies and tax breaks to corporations, including the agribusiness. Corporations should not have their own tax breaks or tax rates, since they are considered people created on paper by the Supremes. The claim is these subsidies and tax breaks create jobs and keep prices lower for consumers. I create jobs simply by consumption, so where's my subsidy? If the republicans want "free markets", end everything put in place to benefit corporations and let the chips fall where they may. They will find their constituents, who live in rural areas, will be the ones paying more with less, since statistics show median and average incomes are lower in these areas.

Posted by: flyonthewall on July 4, 2010 at 11:41 AM | PERMALINK

@fed
Just wondering about the allcaps... if they're employed, buy not GAINFULLY, i.e. profitably, then they shouldn't get subsidies??

Posted by: cr on July 4, 2010 at 11:55 AM | PERMALINK

buy = but

Posted by: cr on July 4, 2010 at 11:57 AM | PERMALINK

Sorry Steve, I love your blog but the subsidies are the fault of both sides of the aisle. The article clearly states that Robert Menedez of NJ didn't include cutting subsidies to oil refineries because his state is home to many of them. We need to look at Agribusiness, at oil, at all subsidies really as well as the military to find cuts, cuts and more cuts if we are serious about the deficit. But, much as I hate the Republicans, it's not just them.

Posted by: Lynn on July 4, 2010 at 2:10 PM | PERMALINK

---
"We're giving tax breaks to highly profitable companies to do what they would be doing anyway. That's not an incentive; that's a giveaway."
---

And low capital gains rates on billionaires is like incentivizing fish to swim.

Posted by: eightnine2718281828mu5 on July 4, 2010 at 3:52 PM | PERMALINK

@fed
Just wondering about the allcaps... if they're employed, buy not GAINFULLY, i.e. profitably, then they shouldn't get subsidies??

Posted by: cr

Without a home heating credit many working poor would be forced to move south just to keep from freezing, as I said above those subsidies should go directly to the head of household.

Being from Michigan I have watched and even experienced taking far less wages after companies have moved out of the country, often working two part time jobs and still not making the amount of the job lost and of course part time jobs do not offer any benefits. What the Republicans are doing now with blocking every idea to move this country out of the recession is exactly what has been done to Governor Granholm. I have watched cities in my state break their budgets to build better utility services to companies so they would stay only to watch them close the doors anyways.

We are now witnessing a campaign to destroy gainful employment and replace it with temporary workers and sub contractors who get no benefits and never accrue enough time to join a unionized workplace. They will be strung along to work paycheck to paycheck and will never be eligible to even collect unemployment after they are let go, there will be so many of them wages will be at or very near minimum wage. If you do not like it, you will not work. They will lure them into debt with pawn shops and pay-day lenders making sure they never own anything of value.

Coming to a town near you.

So yes GAINFUL employment is very important and can not be stressed enough.

Posted by: Fed Up and Tired on July 4, 2010 at 4:28 PM | PERMALINK

Thank God the Cat Food Commission is planning on reducing SS benefits; that should help relieve middle class anxieties and promote economic optimism.

While we're at it, maybe corporations could demand that their employees eliminate the first-born of every household to relieve families of unnecessary financial strains.

That would allow them to accept lower wages so that their employers could remain competitive enough to boost CEO bonuses.

Posted by: eightnine2718281828mu5 on July 4, 2010 at 5:22 PM | PERMALINK




 

 

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