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Thread: Senate blocks bill repealing $2 billion in oil tax breaks

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by MrVicchio View Post
    I'm not.

    Taxes are a cost to business. The higher the tax increase, the more it hurts the profit margin, the more the effect ripples out. Be it higher priced goods, laid off employees, less investment into the business (that would purchase of new equipment, or expansion of existing)...

    Taxes are an artificial cost placed on businesses, and like ANY cost, it has consequences.
    If that business is a monopoly/oligopoly, an increase in the price of goods produced by that business is not one of the consequences.

    If that business did increase its product price, the demand for that product would be lessened, causing that business to sell fewer units and be worse off.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by solletica View Post
    If that business is a monopoly/oligopoly, an increase in the price of goods produced by that business is not one of the consequences.
    Wouldn't the fact that they are practically a monopoly means that you can not go to anyone else? So yes they can pass that cost onto you. You have no choice but to go to them if you wish to drive your car. Yes you can drive less, you can even get an electric car or give of POVs altogether. But the airlines, trucking industry, transportation and anything else that uses fuel and or oil products has no choice but to buy fuel or oil products and that gets passed down you when you go the grocery store or some other place to buy goods. Europe charges a arm and leg for gas but yet people still drive.

    If that business did increase its product price, the demand for that product would be lessened, causing that business to sell fewer units and be worse off.
    For someone who loves to say "Silly conservatives need to go to school and learn ECON instead of getting their "education" from rush and/or palin." You seem to lack any ability to do simple math or basic internet research. If the USA uses almost 7 billion barrels of oil a year, a barrel is 42 gallons which each barrel makes 19-21 gallons of gas. 138.5 billion gallons of gas used a year in the USA. And according to wikipedia there are 254.4 million passenger vehicles. So if we were to just divide just those passenger vehicles(not counting the commercial vehicles and jets) into 10 billion dollars that is $39.31 per car each year per passenger vehicle,spread out over 15-20 trips to the gas station in a year that is barely noticeable. Of course that number is probably a pretty high exaggeration seeing how I did not count the commercial trucks,jets,planes, military, and etc.

    Do you honestly believe that you would notice 5 big oil companies making you and every other motorist and user of oil products help pay 10 billion dollars?


    http://www.eia.doe.gov/tools/faqs/faq.cfm?id=33&t=6

    http://www.eia.doe.gov/tools/faqs/faq.cfm?id=24&t=6

    http://www.eia.doe.gov/tools/faqs/faq.cfm?id=23&t=10

    http://en.wikipedia.org/wiki/Passeng..._United_States
    Last edited by jamesrage; 05-19-11 at 05:55 AM.
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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by solletica View Post
    OMG

    Any decrease in tax paid by a firm is offset by increases paid by others. In other words, tax breaks are merely money that comes out of your pocket and goes into the firm's.

    If you still don't get it, consider this. Suppose you and your neighbor are both single and made $50K last year, and your tax rate was 15%. Then both of you would pay $7500 in taxes this year and be left with $42,500 after-tax income. But then let's say Uncle Sam gave your neighbor a subsidy check for $3000, but nothing to you. Then your neighbor would be left with $45,500 while you would still have the $42,500.

    Now what if Uncle Sam instead did not give your neighbor any subsidies, but instead just gave him a 6% tax break, making his tax only 9%, while yours is left at 15%. Now your neighbor would pay only $4500 in taxes, while you'd still pay the $7500, meaning he's be left with $45,500 after-tax income, while you'd be left w/$42,500.

    . . .just like what happened when he got the subsidy.
    exactly what happens with farmers in my community..

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by MrVicchio View Post
    Silly man, companies don't pay taxes, the consumers of their products do with higher costs. Unless you believe in price controls too...
    It is not the paying taxes I worry about, but the funding of multi-billion dollar companies through tax dollars. And they can only raise costs so much before people begin as they already have to drive more fuel efficient cars and electric cars etc...which will drive the price back down.

    Your argument is just like the argument that we need to drill more at home because that will drive prices down, another false thought. Why? Because it supposes that OPEC nations will not decrease their output to compensate and keep prices higher, which they will obviously do.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by American View Post
    Then I suppose my home mortgage tax deduction is also welfare.
    No because you are paying interest into the economy and keeping it going. Oil companies are getting the compensation for simply performing their function as a business.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by solletica View Post
    Increases in on a business' income tax do not affect the prices of its products.

    Silly conservatives need to go to school and learn ECON instead of getting their "education" from rush and/or palin.
    As someone with an advanced degree in Economics and practical business experience, I can assure you that you are wrong. In simple terms, if you increase a companies income tax, the tax increase is applied against the companies margins. Reduce a margin, companies respond by either being more efficient with other 'variable' costs like labor or increase their prices. In other words, it is either the employees or the consumer who suffer through corporate tax increases.

    Silly liberals need to stop listening to MSNBC or reading the NY times to garner their Economics knowledge.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    I say we cut food stamps, and if people want food stamps. They can get chicken, rice and beans.

    I say we free the trade market and abolish your unions.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by solletica View Post
    OMG

    Any decrease in tax paid by a firm is offset by increases paid by others. In other words, tax breaks are merely money that comes out of your pocket and goes into the firm's.

    If you still don't get it, consider this. Suppose you and your neighbor are both single and made $50K last year, and your tax rate was 15%. Then both of you would pay $7500 in taxes this year and be left with $42,500 after-tax income. But then let's say Uncle Sam gave your neighbor a subsidy check for $3000, but nothing to you. Then your neighbor would be left with $45,500 while you would still have the $42,500.

    Now what if Uncle Sam instead did not give your neighbor any subsidies, but instead just gave him a 6% tax break, making his tax only 9%, while yours is left at 15%. Now your neighbor would pay only $4500 in taxes, while you'd still pay the $7500, meaning he's be left with $45,500 after-tax income, while you'd be left w/$42,500.

    . . .just like what happened when he got the subsidy.
    Slight issues with your post however with what I'm talking about.

    First, while the net effect is the same...my neighbor ends up with $45.5k...the time period said money comes is different. A tax break provides for that extra $3,000 dollars to come spread over a 12 month period of time where as the $3,000 subsidy is a lump sum.

    Second, in the case of the tax break that is money never going into the Federal Governments hands. Meaning its not hitting their budget and is not money that they can claim as theirs. In the case of the subsidy, you're simply adding an extra layer of useless beuracracy to the process as you give money to the government so that they can turn around and give it back to you. Allowing them to claim a higher revenue and a higher expenditure level, which in the government is what is used to justify increasing the amount your agency should get to spend the following year.

    So yes, while you could say that Point A and Point B in this situation are the same thing (that my neighbor ends up with 45.5k...the method with which Point B is met and the path of travel is significantly different and thus comparing the two things as if they're identical is a bit in error.

    Similar? Absolutely, but I'd never suggest they weren't similar in nature.

    Subsidies encourage the government to tax people more to be able to give out more money and all together continue the process of government spending and government taxing increasing again and again. Government tax cuts encourage the government to spend less, as they are taking in less money and thus have less money they can send back out. I'm in favor of things that cause the government to shrink its waist size, not things that allow it to continue to be bloated simply to stick it to the evil rich Oil Companies.

    I will say, as I have said multiple times on this forum. I will get behind tax increases in certain areas, including on the oil industry, once...and only once...the government shows a sincere and honest movement towards significant reduction in spending across the board and with reforming our entitlement programs. At that point, when they show us they've fix their OWN problems, then I'd be willing to say that the public should then step in and help to pay down the debt by potentially taking a higher tax burden on those that can handle it for a period of time. But I can not, and will not, support such a notion while our government continues to present an inability to control its gluttonous ways as they have shown, time and time and time again, that when they recieve new streams of income it is not used to pay for what we have now but is justification to expand and add new things to the budget only to turn around later and say "give us more".

    If that means some military bases close down, some children go hungry, some elderly get sick, some poor people don't have a roof, some kids don't go to college, some junky doesn't get clean, some drop out doesn't get a job, some guy with bad luck can't pay his mortgage, some farmers don't get extra cash for growing corn, some labs can't research bear semen, or some museum has to shut down in exchange for moving our country to a place of financial stability for the next generation and beyond? Than absolutely so be it. Because I think the notion that we can continue everything we're doing, and even add to it, all by simply taxing heavier and heavier a small segment of our population and still somehow come out financial stable 40 years from now is similar to suggesting that we should find a leprechaun and stela his gold to make us financially stable.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by Nevergolfpar View Post
    As someone with an advanced degree in Economics and practical business experience, I can assure you that you are wrong. In simple terms, if you increase a companies income tax, the tax increase is applied against the companies margins. Reduce a margin, companies respond by either being more efficient with other 'variable' costs like labor or increase their prices.
    That calculation technique would generate no price change on a microeconomic scale. For a specific business, the product price at which net (after tax) income is maximized is the same as the one for which gross income/profit is maximized.

    The increase in price due to taxation of businesses within a competitive industry is due to the left shift of the supply curve for that whole industry (since taxation creates a disincentive for businesses to operate in that industry)--a macroeconomic effect.

    One that shift is made, the market price increases, and all businesses within that industry have to charge that same price (or else lose money). And I already acknowledged that fact in my other post.

    Where you're confused--despite your economic knowledge--is that the above does not happen for an oligopoly or monopoly like the oil industry.

    In those, an increase in the tax on those industries does not left shift the supply curve, since those few companies are the supply, i. e. the companies' own marginal cost curves are pretty much the whole industry's supply curve (since there is no one else).

    None of those players are going to exit the industry or cut back on wells because of an extra income tax, because the tax wouldn't create a sufficient incentive for them to do so.

    And those companies already set the price at a point that optimizes profits for them based on the global demand for oil, and their own drilling/refining costs.

    Consequently, increasing the tax on, say, oil company profits will have zero impact on the price of crude.

    For all practical purposes, only things that could increase crude prices are increases in the actual production costs of crude (which doesn't happen very often) or an increase in demand.

    The latter is the most common case.
    Last edited by solletica; 05-19-11 at 05:03 PM.

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    Re: Senate blocks bill repealing $2 billion in oil tax breaks

    Quote Originally Posted by jamesrage View Post
    Wouldn't the fact that they are practically a monopoly means that you can not go to anyone else? So yes they can pass that cost onto you.
    A monopoly/oligopoly already sets the price for its product at a point that maximizes profit for it.

    Unless there is a change in demand for the product, or a change in the production costs for that product, any change in price in either direction would result in a loss of profit for that firm.
    Last edited by solletica; 05-19-11 at 05:04 PM.

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