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Who's to say what is "excessive?" Taxing the oil companies will not generate one single drop of additional oil nor cut a penny off a gallon of gas. It's idiotic, anti-capitalist, and dare I say it, UnAmerican.
Why is it we never hear of any suggestions to tax the enormous amount of cash raked in by unions from their members to fund political campaigns? A lot of that money is from members who don't even support the candidate being backed. What do they need all that cash for? I say it is excess cash and should be taxed severely.
Joe wants to stop this "excess tax" business at oil companies. But once you prove the point that you can confiscate profits for no other reason than you wish to play the class card in a political campaign - breeding jealousy and hatred for those who have more than you do - there will be no end to it. Today it's oil companies. Tomorrow, it will be Ag conglomerates. Or maybe Pepsi cola. How fair is it that Pepsi makes billions off of sweetened water?
Play your class card and be damned. Only don't go weeping to Washington when they start taxing "excess profits" on something you disagree with.
All those profits and what have they done to improve gas millage? Find alternate energy sources? These companies are, when you get down to it, ENERGY companies and I can't believe they are short sighted enough not to see the-writing-on-the-wall that oil is finite and someday we'll need alternate energy sources.
If they'd have invested some of these profits into R&D they'd be betting profits from alternate energy sources as well as their remaining oil money.
How many companies, mostly for competition reasons, have been absorbing some of the higher energy costs over the last year or two instead of passing them onto customers? Quite a few if you pay any attention to the news, again, not to be altruistic but because of competitive reasons they need to.
Now contrast that with how much has the oil industry absorbed? I'd wager NONE because there really is no competition between them, so there is nothing to stop them from passing higher costs directly to the customers. Sadly it all comes down to greed in a capitalist society and without some REAL competition to the oil industry they have no reason not to continue this practice.
I'd like to start by taking away the Tax Breaks from the oil companies. Us tax payers have been funding oil company R&D for years and have received nothing in return. I'd rather see that tax money to go universities researching alternate energy sources.
I will not defend the oil companies because I think their profits are ridiculous, but if we look at the ability to raise money, shouldn't the campaigns of the candidates have to answer to this as well? I mean, if you're really willing to raise that kind of money just to campaign, railing against those companies who profit seems to be a bit disingenuous.
http://www.usnews.com/articles/business/economy...
"But unrivaled returns on equity. However, profit margins across industries vary greatly based not on how well each business is doing but how capital- or labor-intensive it is. Oil is among the most capital-intensive. But look at the oil industry's profits compared with shareholder equity it has available for investment. The U.S. Energy Information Administration's most recent analysis of the oil industry's performance, released just last month, showed oil industry return on equity of 27 percent—about 10 points higher than that of other manufacturers. And it has been higher throughout this recent era of high world oil prices, just as it was back during the oil shock that hit in 1980."
Perhaps a windfall profits tax is excessive. But removing each and every tax break these oil companies receive makes perfect sense to me.
I do believe the Congress voted just last week to not allow further development of shale oil. So, on the one hand, they will not let them re-invest in domestic production, causing our dependancy on foreign oil to rise, and prices along with it, and on the other, they want to punish them for the current price of oil.
One other point. A HUGE portion of the rise in the current cost of oil is due to the falling dollar, nothing else. Make a chart of crude oil price vs. the value of the dollar for the past three years. It is eye-opening.
Uh.. energy is a necessity in our world. To drink Pepsi is an option. The oil companies know they can charge what they want for energy, an essential, because people will forgo other things, such as Pepsi and Coca Cola, to pay for energy.
I think it makes much more sense to support renewable energy. For one thing, it's better for the environment, second, it reduces our dependence on foreign oil and third, it creates jobs in the US.
Drilling for oil only creates jobs for those people who want to uproot their families and move to Alaska.
If we explored alternative means of energy production we could become energy secure and financially secure. Besides if we were to retool our factories so they made solar panels, think of how many jobs that would create here (in places other than Alaska). Also, instead of giving Saudia Arabia nuclear technology (do we really want to give the country where most of the 9/11 attackers came from?), think of how great it would be if we could turn the tables, make solar panels here and ship them off to Saudi Arabia and other countries in the Middle East.
So I believe that a tax on oil and non-renewable energy sources would be a great way to start up programs to help factories in places like Michigan to retool for solar and retrain existing workers.
Remember, energy is not an option. Oil will run out one day and it's destroying our environment. So why not tackle all these problems in such a way that jobs in the US are created?
Reducing tax breaks is different, because its forward looking. Perhaps tax breaks should be performance based and not promise based.
The argument for just drilling everywhere is not realistic. New drilling requires a lot of investment, because so much of it now is in complex, difficult areas, while the results are uncertain. . I've also read that there is simply a shortage of people with the high technical skills required to do the job. At any rate, it would be 10-20 years before any real benefits could be seen.
If we have to wait for 10+ years for new oil fields to be developed, it makes more sense to spend those years encouraging alternative fuel. encouraging technology for clean coal power, and developing solar and wind power.
Everyone also includes nuclear power, but I'm leary. No one wants the waste in their back yard, for one thing, and I don't blame them. But I might reconsider if i knew more about how Europe and other countries manage the risks.
In the meantime, the 2nd tier oil companies are investing a higher percentage of assets in R+D despite lower profits. It's not like there is no one doing anything.
Our agro subsdiies are related. Corn based ehtanol is so profitable that it reduces incentive to invest in ethanol produced from other sources, and it reduces food crops as well. It would be cheaper to lower tariffs and import some ethanol from Brazil, while we concentrate on other strategies. The big agro corporations are a lot likge the big oil companies, without a long term vision. and feeling entitiled to guaranteed high profits.
We've been doing everything in bits and pieces without an overall energy policy for too long. it's time to have a real, all-encompassing, strategic plan, so that when the period of unavoidable pain is over, we are on solid ground.
as for expanding domestic drilling...i have no prob with that, if, and only if, all of that oil goes for domestic use....cuz right now it doesnt
the vast majority of oil taken out of the ground in california goes to japan...cuz the oil companies make bigger profits
and the problem has nothing to do with the amount of domestic crude and everything to do with the speculator market
now a windfall tax may be unamerican, but isnt ripping off the consumer, knowing full well that its hurting the overall economy also unamerican?
The fact is that we do have an increasing class problem in the US, and while that might benefit the rich for awhile, what inevitably follows eventually if it gets bad enough, is social unrest, instability and, sometimes great social upheavals.
We already see that in the growing fondness for isolationalism and a backlash against global markets.
For a politician not to notice that and not deal with it would require him to be a deaf and blind moron.
Since we are not yet a dictatorship, our class structure and its trends can't be ignored for too long It's already been ignored for too long. The great unwashed will have theri say, one way or another.
The Democrats seem to stuck in a contradiction. They like high gasoline prices because it discourages consumption. High Gasoline prices make high price alternatives economical. Senator Obama has come out supporting high gasoline prices.
However, high gasoline prices hurt the economy, hurt rural areas more, and are inflationary.
So, the Democratic Party needs to decide what it really wants to do: lower gasoline prices for certain economic reasons or raise energy prices for contradictory economic reasons.
The Demcrats could have had one bill that removed all of the tax breaks for big oil and a second bill for windfall taxes. However, since they really did not want the issue resolved, they got the best of both worlds, the tax breaks continue and they get to blame Republicans.
To state the obvious, taxes get passed through to the consumer. Why are the Democrats working so hard to raise the cost of gasoline when it's at historic highs?
You know it's not nearly as simple as any and all taxes being passed through to consumers. Other factors do come into play. However, I think the issues should be broken out into individual bills. Make the Republicans defend not against a windfall profits tax, but the tax breaks that were granted in an entirely different economic climate. And talk up how some of the oil companies are defending against the government fixing the problem of low royalty payments that were a procedural goof.
The main goal of legislation would be, I hope, to help americans out. Increasing the tax on oil companies probably isn;t going to bring prices down. Reducing the gas tax doesn't add to much. If you really want to help people, you could always subsidize oil (not likely), or drill more (which doesn't help today. Oh, and no extra money for oil shale, a hydrocarbon we have in abundance. Crap, that's not good).
I'm personally a fan of "The man on the moon" project for alternative energy. Even if it's just spinning our wheels, at least it will make the time go by, with a couple of positive stories now and then (peak oil isn;t exactly going to have a lot of good stories, the occasional sizable well not withstanding).
Almost sounds too good to be true but I hope it is.
LA Times: http://www.latimes.com/business/la-fi-greencrud...
Sapphire Energy: http://www.sapphireenergy.com/
.
i think some of the arguments against it are ludicrous, however.
Tully's actors' and authors' tax implies that said actors and authors are government subsidized for the specific purpose of sustaining the economy by providing an esssential need for books and drama.
When arts are subsidized, as I think they should be, it is for the purpose of cultural enrichment, not survival or economic sustainment.
Whether or not the windfall tax would result in lower gas prices depends on how the proceeds are used and how soon you expect to see the results at the pump.
Invested properly, and given enough time, Schumer might well be right. No one has patience these days, though, so there would be an uproar if prices didn't fall the next day..
In short, I think the windfall tax is a bad idea, but it's not crazy.
But yes, when you raise taxes on an industry, the cost does get passed on to consumers in one form or another. Trying to micromanage via government to avoid that just makes it worse. At best, a "monopoly utility market" regulation model can somewhat control the monopoly/oligopoly aspects of the pricing, at a cost of somewhat lowered production, albeit at greater production efficiency.
Runasim--it doesn't matter what you mistakenly believe I imply. Windfall profits? Sure, but why be punitive against just one industry? Let's be fair and do it across the board! As bellisarius notes, farmers are showing record revenues this year, so let's windfall tax them too! (Quick--what would that do to the cost of food? Uh huh.)
We actually have a comparitive for a windfall profits tax against oil companies, in the 1980 WPT tax. That was projected to raise almost $400 billion in federal revenue. Actual revenues were just under $80 billion, and since the tax was deductible half of those were recaptured by the oil companies resulting in net federal revenue of about $40 billion, a tenth of what was projected. In addition the tax discouraged domestic exploration and production while demand continued unabated, resulting in our oil imports increasing steadily. Which is a goodly part of how we got in this mess. Even the New York Times cheered when it was killed off in '88. It's fun to think of sticking it to the oil companies, but experience and analysis says we mostly end up sticking it to ourselves. Narrow taxes designed to address transient phenomena are generically bad ideas, however viscerally appealling. You want to help the American consumer? Drill. Develop new cost-competitive energy technology.
Saw the algal oil thing when it first came out. If they can get roughly an order-of-magnitude reduction in their large-scale production costs, they've got a MAJOR winner. That would put their production cost down to somewhere around $40/bbl-equivalent. That would cut the money flow out from under OPEC, remove tons of power (no pun intended) from Big Oil, would not require any major retooling of existing refineries, and the transportation costs would be near zero because there's no reason not to put your algal-oil plants right next to the refineries. No need to move the crude across half a planet when you can make it next door!
And it's carbon-neutral, and trace-pollutant cleaner than crude to boot. It would likely even be carbon-reducing to some small extent, as there's just no way that some of the CO2 captured out of the atmosphere in the algal production won't be converted to remnant solids. I'm rootin' for 'em. Also for the folks who have almost-not-quite managed to get small-scale solar down to prices competitive with grid power. Pricing aside, that wold be a great thing just by taking the pressure off the grids at peak-demand time.
Keep in mind that I do consider the windfall profits tax a bad idea. I just think that the tax breaks the industry receives that are unique to it should go away while they are making these kinds of profits. And the royalty issue is going to be a PR nightmare for them if it gets pushed more into the public spotlight. And you should know that I'm one of those bright eyed optimists who thinks the solution to all of this is technological. There's algal production, cellulosic ethanol, improved materials for vehicles and planes, more energy efficiency in lighting and other sources of energy consumption, wind power, solar power, tidal power, geothermal, nuclear and that's just things we can do in the relatively short term. There's an MIT developed technology that uses ethanol in a different way, the hypercar and improvements in LED lighting among other things. What we need to do as a country is encourage more innovation and ways for the innovation to enter the market faster and with as wide a distribution as possible.
You are talking about taxes without incorporating tax breaks into the equation. A portion of windfall profits is made possible by tax breaks and subsidies in the first place. The taxpayers are already paying the rise in prices you are prodicting, only we don't see it as a number at the pump.
i do think we need to have a new look at agro businesses, as well. A program that was started to help family farms now benefits large, corporate businesses.
Taxpayers pay for low food prices, only you don't see it on your grocery bill as a separate item.
It isn't a question of across-the-board taxation, as you keep reiterating.
It's a question of recouping government investment which is no longer needed.
As I said, for a nmber of reasons, I think the windfall tax is not the best way to go.
Neither is throwing money at corporations without accountability.