Senate blocks bill repealing $2 billion in oil tax breaks

MrVicchio said:

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.

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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.

solletica said:

If that business is a monopoly/oligopoly, an increase in the price of goods produced by that business is not one of the consequences.

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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.

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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/Passenger_vehicles_in_the_United_States

solletica said:

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.

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exactly what happens with farmers in my community..

MrVicchio said:

Silly man, companies don't pay taxes, the consumers of their products do with higher costs. Unless you believe in price controls too...

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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.

American said:

Then I suppose my home mortgage tax deduction is also welfare.

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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.

solletica said:

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.

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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.

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.

solletica said:

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.

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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.

Nevergolfpar said:

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.

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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.

jamesrage said:

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.

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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.

solletica said:

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.

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If its a practically a monopoly then you have no other choice but to buy their product.

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

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Of course it will have an impact on the price of crude,it will be miniscule enough that you do not notice. To say it will have zero impact on the price of crude is simply false.

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.

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Taxation is part of a production cost just like labor,land,materials and other stuff.

solletica said:

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.

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You Keynesian's never cease to amaze me. A lot of theory but no basis in fact and the relationship between tax law,margins and corporate profits. You must understand that when Keynes proffered his theory, taxation of individuals and corporations was still in its infancy--a non-player in the current economic model. So regardless of how the supply curve may or may not be affected still has no bearing on the price of gasoline that we both pay at the pump.

Your above post focus's on the price of crude (and demand) as the sole determining factors in corporate profits of oil companies. Furthermore, you state that ' 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.' However, you fail to realize that it is the collective world market which dictates the commodity price of oil, not the individual oil companies. From that aspect alone your original post on the topic (the one I first responded to) is misguided.

While we both are in agreement that increasing taxes on the oil companies profits will have zero impact on the overall price of crude (as a commodity), you can't escape the fact that when you tax into a corporations margins, said corporation will respond in kind and pass that cost onto the consumer or increase operational efficiencies like cut labor. This is especially more prevalent in situations where we are dealing with a monopoly or oligopoly, where there are few players in the competitive marketplace to harness back price points.

solletica said:

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.

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EXACTLY SOLLETICA YOU JUST NAILED IT ON THE HEAD!!!!!!!!!!!!!!!!!!!!! Your second sentence is profound. Now to lead you down the road to enlightenment, which of these costs from a business sense is income taxation? Is it not a production cost? If you agree that income taxes are indeed a production cost, you just assisted me in proving you wrong. You are essentially in agreement then (based off the above sentence) that an increase in income taxes on the oil companies, is going to be passed on to the consumer (i.e. you and I). Very well done.

Nevergolfpar said:

EXACTLY SOLLETICA YOU JUST NAILED IT ON THE HEAD!!!!!!!!!!!!!!!!!!!!! Your second sentence is profound. Now to lead you down the road to enlightenment, which of these costs from a business sense is income taxation? Is it not a production cost? If you agree that income taxes are indeed a production cost, you just assisted me in proving you wrong. You are essentially in agreement then (based off the above sentence) that an increase in income taxes on the oil companies, is going to be passed on to the consumer (i.e. you and I). Very well done.

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Thought maybe you missed this post back a few pages:

"the nonpartisan Congressional Research Service concluded that eliminating the tax breaks would be unlikely to result in higher gasoline prices, which are influenced by a host of factors. The report said the bill would raise about $1.2 billion in 2012. By comparison, the five oil companies had combined revenues of $1.5 trillion last year."

Nevergolfpar said:

EXACTLY SOLLETICA YOU JUST NAILED IT ON THE HEAD!!!!!!!!!!!!!!!!!!!!! Your second sentence is profound. Now to lead you down the road to enlightenment, which of these costs from a business sense is income taxation? Is it not a production cost? If you agree that income taxes are indeed a production cost, you just assisted me in proving you wrong. You are essentially in agreement then (based off the above sentence) that an increase in income taxes on the oil companies, is going to be passed on to the consumer (i.e. you and I). Very well done.

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Or the company can just eat the profit loss, like they should. Evil maximum at its finest.

Catawba said:

Thought maybe you missed this post back a few pages:

"the nonpartisan Congressional Research Service concluded that eliminating the tax breaks would be unlikely to result in higher gasoline prices, which are influenced by a host of factors. The report said the bill would raise about $1.2 billion in 2012. By comparison, the five oil companies had combined revenues of $1.5 trillion last year."

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Thanks for the insight, but no I did not miss it. The CRS like the CBO are the nation's calculator--you plug in the data, it spits out the results independent of other contributing variables like opportunity costs etc... These 'think tanks' do not have the ability to make assumptions with a high degree of accuracy. As a result they data mine to the extent that variables are known. For example, CRS has no way of accounting for how an oil company will react should the Federal government eliminate the tax subsidies. The decision makers in the oil business are not static in their thinking, they will find a way to reduce their tax liabilities or adjust for the lost revenue. Unknown variables such as how an oil company will react never get plugged into the data model, thus can never be accounted for as accurate analysis. So when the CRS says that gas prices will not be affected, take what they say with a large 'grain of salt'. In the meantime, I will rely on my own logic and wisdom when assessing how an industry like oil will react under such scenarios, independent of the CRS.

xpiher said:

Or the company can just eat the profit loss, like they should. Evil maximum at its finest.

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Give me one valid reason why any company should 'eat the profit loss, like they should'? Furthermore, how is this evil?

Nevergolfpar said:

Give me one valid reason why any company should 'eat the profit loss, like they should'? Furthermore, how is this evil?

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Evil Maximum is from a very specific book. Maybe you should Google the phrase and enlighten yourself.

xpiher said:

Evil Maximum is from a very specific book. Maybe you should Google the phrase and enlighten yourself.

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You still have failed to answer my questions?

As for the phrase 'evil maximum', I have spent some time enlightening you, maybe you could reciprocate? Then again, maybe not because I probably would not read it anyways.

disneydude said:

Republicans have never seen a corporate welfare bill that they haven't loved.

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Looks like you passed hackery 101. :thumbs:

Nevergolfpar said:

Thanks for the insight, but no I did not miss it. The CRS like the CBO are the nation's calculator--you plug in the data, it spits out the results independent of other contributing variables like opportunity costs etc... These 'think tanks' do not have the ability to make assumptions with a high degree of accuracy. As a result they data mine to the extent that variables are known. For example, CRS has no way of accounting for how an oil company will react should the Federal government eliminate the tax subsidies. The decision makers in the oil business are not static in their thinking, they will find a way to reduce their tax liabilities or adjust for the lost revenue. Unknown variables such as how an oil company will react never get plugged into the data model, thus can never be accounted for as accurate analysis. So when the CRS says that gas prices will not be affected, take what they say with a large 'grain of salt'. In the meantime, I will rely on my own logic and wisdom when assessing how an industry like oil will react under such scenarios, independent of the CRS.

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So we should accept your opinion over that of the nonpartisan Congressional Research Service?

Nevergolfpar said:

You still have failed to answer my questions?

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Because paying for services that you benifit from is the right thing to do instead of being a free-rider.

As for the phrase 'evil maximum', I have spent some time enlightening you, maybe you could reciprocate? Then again, maybe not

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Google the phrase. Its better if you read about it then me telling you about.

Catawba said:

So we should accept your opinion over that of the nonpartisan Congressional Research Service?

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Until you can provide a link directing me to the CRS's research AND methodology of their research--then yes, my wisdom and logic should be weighed with more authority. Provide me the link (I looked could not find the study--all I saw was something about Harry Reid) I would be more than willing to read it. Until I see such evidence to the contrary, I stand behind my position...in fact I would be willing to wager I am correct.

xpiher said:

Because paying for services that you benifit from is the right thing to do instead of being a free-rider.

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...And if we all were benefiting from the services of reduced gas prices, by virtue of oil tax subsidies, does that not make us both 'free-riders'? Sarcasm aside, from a tax standpoint by applying your logic, then every time you sign your 1040 after taking a personal exemption, you too are a free rider. Essentially, there is no difference between these so-called tax subsidies and personal exemptions on a tax return.

Nevergolfpar said:

...And if we all were benefiting from the services of reduced gas prices, by virtue of oil tax subsidies, does that not make us both 'free-riders'? Sarcasm aside, from a tax standpoint by applying your logic, then every time you sign your 1040 after taking a personal exemption, you too are a free rider. Essentially, there is no difference between these so-called tax subsidies and personal exemptions on a tax return.

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There is a very large difference. The difference being that the personal exemption is meant to not tax for your upkeep. The tax subsides/breaks are only there to increase profit margins.

And since someone PMed me with the info that google sucks right now, Evil maximum is a phrase repeated throughout The Wealth of Nations, something like 40 different times in various contexts by all lead to the same conclusion, Capitalism only works to benefit of everyone if people operate morally otherwise it only operates in the favor of the powerful.