Article Contributed on: 7/28/2009 1:20:29 PM
Who determines what is a "fair" amount of taxation? Who determines what is a "fair" profit? Is the US Congress the ultimate arbiter of "fairness?" Is the issue of "fairness" confused by the sheer size of the numbers? What's a "windfall profit?" Mostly rhetorical questions but important none-the-less.
Although it has been somewhat lost in all the media coverage and discussion of the national health care reform legislation, there is also a national energy policy proposal being discussed in the congress. Much of this plan is concerned with how oil companies, or as they like to be called now, "energy" companies are taxed and at what rates. Inherent in the proposal is a somewhat nebulous national desire to "increase the usage of renewable, green energy sources" and to "reduce our dependence on foreign oil". The "Holy Grail" being complete "energy independence" and, presumably, all power generation coming from domestic, non-fossil fuel, green, renewable energy sources. Like the other "Holy Grail", this one isn't going to be found either.
Part of the plan involves changing the tax structure for taxing oil companies. As originally proposed by the Obama administration, a new "windfall profits" tax would be imposed with the proceeds going to provide tax rebates of $500 for an individual or $1000 for a married couple. (The "wind fall profits tax" was no such thing...it was an excise tax imposed on the difference between the market price of oil and an average base price DETERMINED BY THE GOVERNMENT at a point in time.) Additional money from increased taxes on the industry would be used to promote "renewable" energy. As it stands currently, the major "renewables" (wind, solar, bio-mass and tidal) are not price competitive with coal, natural gas and nuclear. They require government subsidies, tax credits or direct investment...with your tax dollars. But let's look at this a little more closely and let's "write out" all the zeros in the numbers:
In 2006, about 100,000,000 (One Hundred Million) individual American taxpayers paid about $136,000,000,000 (One Hundred and Thirty Six Billion dollars) to the IRS. These 100,000,000 taxpayers represented the "bottom" 75% of the total of about 132,000,000 (One Hundred and Thirty Two Million) individual taxpayers. In the same year, US oil companies paid about $138,000,000,000 (One Hundred and Thirty EIGHT Billion dollars) in corporate income taxes to the IRS. These were just federal income taxes...they didn't include local, county and state income taxes, severance taxes, property taxes, special use taxes or royalties which are paid directly to mineral owners including the US government.
Yes, oil companies can and do make huge (number) profits...BUT NOT EVERY YEAR. In the 25 year period of 1980 through 2004, oil companies paid more than $2,200,000,000,000 (Two Trillion, Two Hundred Million dollars) in TOTAL taxes which included the aforementioned exceptions. That amounts to more than THREE TIMES what oil companies earned in total profits during the same period. In other words, governments at all levels, particularly the federal government, "profited" more from oil company taxes than did the shareholders in the companies. (Some years you spend more on research and unsuccessful exploration drilling than your revenue from production. Some years oil prices fall below what it costs to produce a barrel. Does anyone remember $3.25 per barrel oil? I do...as late as 1972!)
So, what's "fair?" Should oil companies be limited on the amount of profit they make in good years? (Alternatively, maybe oil companies could receive a subsidy in the years that they lose money?) Should corn farmers pay a windfall profits tax on their production with prices four or five times what they were pre-ethanol? If ExxonMobil loses several billion dollars in a year, is it "too big to fail" and should it receive a bail out? If it did, would its CEO receive a multi-million dollar bonus? See, some rhetorical questions are hard to answer.
http://www.taxfoundation.org/news/printer/1168.html
http://www.uhnd.com (Author: FLIrishK9 July 31, 2008
http://www.examiner.com/examiner/x-2950-Denver-Energy-Industry-Examiner