First, there is no such thing as a "permanent" tax break. Every single one of them has an expiration date, and many have been promulgated for many industries and then cancelled for various reasons.
I had to laugh at
JohnRBaker said:
Well why then shouldn't the alternative energy industries also be given virtually permanent tax subsidies?
Since without massive tax incentives that industry would not even exist (other than its proper place of providing retail energy to facilities remote from the power grid). The largest maker of solar panels in the world is BP (one of the largest of those evil oil companies) and when I retired from that company in 2003 (disregarding tax incentives) they hadn't ever made a dime selling solar panels, they stayed in the business because the tax incentives made basically all the income from sales, free of taxes which allowed them to legally avoid taxes on other, profitable activities. Solyndra failed because they didn't have a profitable sideline to apply their 100% tax incentives to. This industry has massive tax credits PLUS people who purchase the equipment get alternative energy credits that can equal the cost of certain equipment so the net cost of purchasing this junk is zero or near zero.
And speaking of tax credits, did you deduct your home mortgage interest (deductible because Congress felt that home ownership was stabilizing and revenue producing) and your contribution to your IRA or 401k (deductible because Congress felt that retirement savings reduced the cost of maintaining the aging population) from your taxes last year.
The debt crises has come from the federal government grossly exceeding its Constitutional mandate and recklessly spending money without a plan for how they were going to pay it back. Tax incentives for corporations actually improve the Federal Government's balance sheet since corporate taxes are revenue negative (i.e., if the corporate tax was eliminated in its entirety, federal income would increase substantially). This is because corporations have to spend the money that comes in--they execute capital projects, they employ flesh and blood humans, they pay dividends, they invest in other firms, all of which increases the amount of money individuals must pay taxes on. This multiplier effect is around 6-7 for non-tax spending (i.e., every dollar that is spent in the free market is "re-spent" within the economy 6-7 times). The multiplier for tax collection is 2-3 and dropping as more and more of the tax revenues is going to service debt held by foreign entities.
This negative contribution is even worse for Oil & Gas because every dollar the industry spends on taxes (and that number is well over a trillion dollars a year even with the tax incentives you abhor) is a dollar that doesn't get invested in Oil & Gas exploration and development. The U.S. Government is the largest mineral owner by a wide margin, so when a field like Prudhoe Bay makes a million barrels of oil, and that oil sells for $100 million, the U.S. Government gets something like $12.5 million in mineral royalties. The net income from that $100 million is probably around $20 million so the income tax would be something like $9 million. If that $9 million went into further exploration and it was successful then the royalty income from the new supplies of hydrocarbons would be orders of magnitude higher than the original income tax.
The Federal Corporate Income Tax is simply a way for the Government to influence investment directions of an industry. The Congress' track record in this area is awful, but they keep wanting to try, bless their hearts. For example, ethanol is added to fuel as an oxidant. It is not a particularly good oxidant and it is quite hydrophillic and results in accumulation of water in supply tanks. The only reason that the mediocre fuel additive exists is because tax incentives to the farmers and refiners of ethanol make is marginally profitable to produce. If those tax incentives went away and were replaced by emissions standards then the industry would have been working diligently over the last 30 years to find an oxidant that made economic and environmental sense, but with ethanol selling for depressed prices (due to the tax credit) and the government mandate that ethanol must be added there is no economic incentive to bring a new product to market.
Every one of the industries you mentioned enjoys many tax credits and other incentives. Starbucks gets tax credits for opening stores in blighted communities and paying salaries to "disadvantaged" workers (if they hire an Indian and pay more than the minimum wage they get a $4000 tax credit over and above the deduction for the actual salary and benefits). The smart-phone industry gets massive investment tax credits and huge research tax credits. On a percent-of-revenue basis the software industry gets more tax incentives than Oil & Gas, but the Democrats and their puppy-dog media have focused on Oil and Gas as inherently evil.
This is especially sad since the Oil & Gas industry will be the reason that the economy flourishes. We are coming out of the recession solely because the Bakaan and Eagle Ford Shale Oil projects have cut our imported energy bill in half while the Shale Gas has provided the energy to fuel the economy at 10-25% of the world price for natural gas. Further, if the government will get the hell out of the way of exported energy and allow LNG exports, the industry will lower the world natural gas price by 20-30% while allowing the Federal Government to pay off the national debt in less than 5 years.
I just looked up
Exxon Mobil's 2011 Financial Statement and on Page F-15 they show 2011 income tax was $31 billion for an effective tax rate of 46% and total taxes of $108 billion on $41 billion in after tax income. Seems like a whole bunch of "fair share" to me.
The industry certainly spends many billions of dollars trying to be heard in Washington. That is a fraction of what the Film industry, the farm industry, the Unions, the environmental NGO's, or even the software industry spends, but still serious money. That is the way this corrupt game is played, and if Congressmen were not subject to be influenced, then companies and industries would not be forced to try to influence them before some other special interest group was able to come in and stab them in the back.
David Simpson, PE
MuleShoe Engineering
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