Obama's tax on oil companies

[jreeves]

Obama has proposed new taxes on oil companies' winfall profits. Great proposal....

http://www.taxfoundation.org/news/show/1168.html

This week, the Senate will hold hearings on rising oil and fuel prices and the subsequent record earnings recently posted by U.S. oil companies. Some lawmakers have suggested that these profits are unseemly and, thus, should be subject to a new “windfall profits” tax.

Before rushing to create a new federal tax, lawmakers should ask two questions:

(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?

The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments—including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.

The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.1

CRS also found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent. A side effect was declining, not increasing, tax collections. Figure 1 clearly shows that while the tax raised considerable revenue in the initial years following its enactment, those revenues declined to almost nothing as the domestic industry collapsed.


Lmao....Obama is clueless...

 

[jreeves]

Obama has proposed new taxes on oil companies' winfall profits. Great proposal....

http://www.taxfoundation.org/news/show/1168.html

This week, the Senate will hold hearings on rising oil and fuel prices and the subsequent record earnings recently posted by U.S. oil companies. Some lawmakers have suggested that these profits are unseemly and, thus, should be subject to a new “windfall profits” tax.

Before rushing to create a new federal tax, lawmakers should ask two questions:

(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?

The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments—including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.

The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.1

CRS also found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent. A side effect was declining, not increasing, tax collections. Figure 1 clearly shows that while the tax raised considerable revenue in the initial years following its enactment, those revenues declined to almost nothing as the domestic industry collapsed.


Lmao....Obama is clueless...

Obama's tax plan....
Democratic presidential hopeful Barack Obama today called for a windfall profits tax on oil companies, which he said would be used to ease the burden of rising energy costs on poor and middle-class Americans.

"It isn't right that oil companies are making record profits at a time when ordinary Americans are going into debt trying to pay rising energy costs," he said. "That's why we'll put a windfall profits tax on oil companies and use it to help Indiana families pay their heating and cooling bills and reduce energy costs".



http://www.guardian.co.uk/world/2008/apr/25/barackobama.uselections20081?gusrc=rss&feed=worldnews

Clueless......

 

[Alpha1]

The brainwashed boneheads of the left will get back to you after they've had a

chance to search the left wing, liberal, and Democrat blogs for what they hope

will pass as intellectual answers supporting the "tax big oil" plan to save the

world....

 

[Yurt]

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

yay, i can't wait till he taxes LOTTO winnings at 90% because they are a windfall profit, then we shall see the libs rise up in anger

 

[jreeves]

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

yay, i can't wait till he taxes LOTTO winnings at 90% because they are a windfall profit, then we shall see the libs rise up in anger

It seems like the liberal's solution for everything is raising taxes. They fail to realize in a lot of cases, by raising taxes, you actually decrease tax revenues.

 

[TopGunna]

I'm sorry, wasn't there just a thread titled "obama sticks to principle...clinton n mccain pander" regarding their gas tax holiday proposal? I'm no expert, but I'm pretty sure this qualifies as pandering as well.

You can raise taxes on profits if you want, but that won't happen in a vacuum. Companies will change their pricing strategies accordingly, and any increased tax burden will ultimately be paid by the consumers.

 

[Ravi]

I'm sorry, wasn't there just a thread titled "obama sticks to principle...clinton n mccain pander" regarding their gas tax holiday proposal? I'm no expert, but I'm pretty sure this qualifies as pandering as well.

You can raise taxes on profits if you want, but that won't happen in a vacuum. Companies will change their pricing strategies accordingly, and any increased tax burden will ultimately be paid by the consumers.

Isn't everything ultimately paid for by the consumer anyway? I've never understood why so many businesses get tax breaks. Why not make the tax rate equal for all, then we wouldn't have to worry about enacting windfall taxes.

 

[doeton]

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

dude the more i read this, the more i almost have to think it's a joke if it weren't for you other posts showing it fits with your overall worldview ...but then again most of your posts appear to be well thought out.


are you familiar with the concept of windfall?

lordy lordy

duh...of course there wouldn't there be calls for a windfall tax when oil was 20 bucks a barrel??? that's pretty much the point of a windfall tax...

um and then yurt you say the oil campanies haven't done a dam thing to deserve the profits that it all because of the market.

hello...if one was going to do a windfall tax...that sure sounds like the perfect place for one.

 

[doeton]

Isn't everything ultimately paid for by the consumer anyway? I've never understood why so many businesses get tax breaks. Why not make the tax rate equal for all, then we wouldn't have to worry about enacting windfall taxes.

actually this was part of Hillary's plan for the gas tax holiday.

the economics of it goes like this.

supply of oil is static in the short term...it can't be changed...the oil rigs are all going at full steam currently. yeah, the long term with price changes more oil could be brought on, but not in the short term.

thus the price is dependent on demand...and the price will rise to what consumers will pay...which is why it was pandering to go with the gas tax holiday.

since any reduction in the price brought on by the gas tax holiday would be gobbled up the suppliers who would simply increase the price to the point where demand equals supply.

The windfall profit tax on the other hand. Hits the suppliers before it hits the consumers.

Since the price already determined by demand they can't in the short term pass that tax on to consumers.

sorry but this socialist has a much better understanding of econ than most naive capitalists.

 

[doeton]

man, this is great.

it shows Obama is actually the candidate supporting the working people with a real plan to help deal with the soaring energy costs.

both hillary and mccain supported the pandering gimic of a gas tax holiday which any economists will point out really only results in a give away to oil companies.

Barak's plan will actually put the tax on the oil campanies...and if you read the details only applies when the price of oil is over $80 rofl: not at $20).

It sure is refreshing to see a candidate who understands economics.

Thanks for bring up this topic guys.

 

[Ravi]

man, this is great.

it shows Obama is actually the candidate supporting the working people with a real plan to help deal with the soaring energy costs.

both hillary and mccain supported the pandering gimic of a gas tax holiday which any economists will point out really only results in a give away to oil companies.

Barak's plan will actually put the tax on the oil campanies...and if you read the details only applies when the price of oil is over $80 rofl: not at $20).

It sure is refreshing to see a candidate who understands economics.

Thanks for bring up this topic guys.

Hillary's plan included a windfall tax.

 

[doeton]

Hillary's plan included a windfall tax.

gee rav, i thought you were going to grow up.

right, hill's plan includes the windfall...duh

but it also included the gimic of the gas tax holiday...heard of robbing peter to pay paul?

 

[Ravi]

I thought you were going to grow up.

 

[doeton]

I thought you were going to grow up.

ok, i should have said save your arrows...and since i brought hill in the first place...it's my bad. ...the doeton will never grow up

 

[Ravi]

ok, i should have said save your arrows...and since i brought hill in the first place...it's my bad. ...the doeton will never grow up

I've been meaning to ask you, what the heck is a doeton?

 

[TopGunna]

actually this was part of Hillary's plan for the gas tax holiday.

the economics of it goes like this.

supply of oil is static in the short term...it can't be changed...the oil rigs are all going at full steam currently. yeah, the long term with price changes more oil could be brought on, but not in the short term.

thus the price is dependent on demand...and the price will rise to what consumers will pay...which is why it was pandering to go with the gas tax holiday.

since any reduction in the price brought on by the gas tax holiday would be gobbled up the suppliers who would simply increase the price to the point where demand equals supply.

The windfall profit tax on the other hand. Hits the suppliers before it hits the consumers.

Since the price already determined by demand they can't in the short term pass that tax on to consumers.

sorry but this socialist has a much better understanding of econ than most naive capitalists.

I'm going to disagree, because US demand for gasoline is extremely inelastic. People are going to fill up their tanks every week, regardless of the price. If gasoline prices hit $8/gallon, people might consume less gasoline, but I'll go out on a limb and say they won't cut their consumption in half. Similarly, if gasoline prices fell back to $1/gallon, I don't think people are going to drive 4 times as much. We're all still going to drive our 12,000 - 15,000 miles per year.

If the gas tax is lifted, it'll benefit all suppliers of gasoline. The instant effect is that the 20 cents/gallon designated for the government tax moves over to the profit pool. The many suppliers can all agree to keep the price where it is, but all it takes is one supplier to cut his prices, and every rational consumer will buy from that supplier. If there are 10 gas stations in town, you'll go to the one that's selling gas for cheaper (as a rational person). And if you're the owner of that gas station, you're no longer making 11% profit on 10% of the local market, you're making 8% profit on 100% of the local market. If suppliers are in it for the profit, one of those options is much more attractive.

 

[Alpha1]

actually this was part of Hillary's plan for the gas tax holiday.

the economics of it goes like this.

supply of oil is static in the short term...it can't be changed...the oil rigs are all going at full steam currently. yeah, the long term with price changes more oil could be brought on, but not in the short term.

thus the price is dependent on demand...and the price will rise to what consumers will pay...which is why it was pandering to go with the gas tax holiday.

since any reduction in the price brought on by the gas tax holiday would be gobbled up the suppliers who would simply increase the price to the point where demand equals supply.

The windfall profit tax on the other hand. Hits the suppliers before it hits the consumers.

Since the price already determined by demand they can't in the short term pass that tax on to consumers.

sorry but this socialist has a much better understanding of econ than most naive capitalists.

You seem to have some idea that the gas tax holiday is meant to have some effect on the world price of oil....it has nothing to do with demand, supplies, or the world price at all....it will only effect the price Americans pay at the pump....it will not have an effect on gas prices anywhere else, and is not meant to...

 

[doeton]

I'm going to disagree, because US demand for gasoline is extremely inelastic. People are going to fill up their tanks every week, regardless of the price. If gasoline prices hit $8/gallon, people might consume less gasoline, but I'll go out on a limb and say they won't cut their consumption in half. Similarly, if gasoline prices fell back to $1/gallon, I don't think people are going to drive 4 times as much. We're all still going to drive our 12,000 - 15,000 miles per year.

that's a good argument. I'll give you that gas demand might be inelastic in the very very short term (like week one). but you admit that if gas hits $8 bucks people would cut consumption (that's makes calling gas demand extremely inelastic well a stretch - pun intended).

Of course it makes sense too. the higher gas prices go the more people start looking to save. For teenagers and young adults that switch is obvious, even with the increase we've seen so far, it's hard not to imagine the teens saying forget the cruising around town tonight, let's just drink da beer here? Right? the higher it gets more folks wanting to vacation start to change their plans. Right? And more folks consider the bus or car pooling (myself included).

come on whats happening to suv sales? you think if gas dropped to 1 it wouldn't go right back up?

If the gas tax is lifted, it'll benefit all suppliers of gasoline. The instant effect is that the 20 cents/gallon designated for the government tax moves over to the profit pool. The many suppliers can all agree to keep the price where it is, but all it takes is one supplier to cut his prices, and every rational consumer will buy from that supplier. If there are 10 gas stations in town, you'll go to the one that's selling gas for cheaper (as a rational person). And if you're the owner of that gas station, you're no longer making 11% profit on 10% of the local market, you're making 8% profit on 100% of the local market. If suppliers are in it for the profit, one of those options is much more attractive.

another good argument. only it begs the question. Riddle me this, since oil companies are currently making record profits...don't ya think along the lines you just posted that 'one of em might think hey i can lower my price? all it takes is one supplier to cut his prices, and every rational consumer will buy from that supplier. If there are 10 gas stations in town, you'll go to the one that's selling gas for cheaper'????'

again that's why it turns out that the supply is static the demand is what drives the prices.

either that or econ is just bogus.

 

[TopGunna]

that's a good argument. I'll give you that gas demand might be inelastic in the very very short term (like week one). but you admit that if gas hits $8 bucks people would cut consumption (that's makes calling gas demand extremely inelastic well a stretch - pun intended).

Of course it makes sense too. the higher gas prices go the more people start looking to save. For teenagers and young adults that switch is obvious, even with the increase we've seen so far, it's hard not to imagine the teens saying forget the cruising around town tonight, let's just drink da beer here? Right? the higher it gets more folks wanting to vacation start to change their plans. Right? And more folks consider the bus or car pooling (myself included).

come on whats happening to suv sales? you think if gas dropped to 1 it wouldn't go right back up?

I do think that gasoline demand is inelastic - but not perfectly inelastic. Like you've said, gas hitting $8/gallon would likely cause people to cut their "luxury" driving (vacation road trips, teens joyriding). But there's a certain amount of "necessary" driving people won't give up unless prices really skyrocket.

SUVs sales dropping makes sense because demand for SUVs is pretty elastic. The availability of fuel-efficient alternatives (compact cars, hybrids) allows for that.

Unfortunately, at this point in time there isn't a ready-available substitute for gas. If you want to drive, your car's engine needs gasoline.

another good argument. only it begs the question. Riddle me this, since oil companies are currently making record profits...don't ya think along the lines you just posted that 'one of em might think hey i can lower my price? all it takes is one supplier to cut his prices, and every rational consumer will buy from that supplier. If there are 10 gas stations in town, you'll go to the one that's selling gas for cheaper'????'

again that's why it turns out that the supply is static the demand is what drives the prices.

either that or econ is just bogus.

Well, you're right that oil companies are posting record profits, but their costs of doing business are also record-high. As an industry, they're only making an 8% return on sales. In percentage terms, that's not much. Non-profits here in the DC area charge the government as much as 20% for high-risk projects.

As for the oil company profits, most of that 8% goes to shareholders, 401Ks, and pensions of ordinary Americans. You've got to earn a reasonable return on investment for your investors. Granted, the 8% is applied to much larger revenues than before, so the nominal profits are much larger too.

That being said, if price gauging was going on, what's to stop the companies from hiking the price to $5/gallon and earning 27% profit? Why weren't prices $3/gallon back in 2000? People are willing to pay it today, so why wouldn't they pay it then?

I think our domestic gas retail market is pretty competitive, and the 8% ROS is about the right percentage to justify doing the business. Unfortunately, all domestic gas retailers are at the mercy of their high input costs.

 

[Paulie]

The brainwashed boneheads of the left will get back to you after they've had a

chance to search the left wing, liberal, and Democrat blogs for what they hope

will pass as intellectual answers supporting the "tax big oil" plan to save the

world....

All this, while everyone waits patiently for YOU to give your reasons why NOT.