On Wednesday, Congress will consider rolling back nearly $18 billion in tax breaks for large oil companies pushed through in 2005. The White House has already voiced its intention to veto such a bill if it passes.
Democrats are hopeful that the bill will pass. Last year, a similar bill languished in the Senate when the GOP opposed it. However, as the price of oil continues to climb, sentiments may be changing.
The revenues from the repeal of the breaks from the oil companies – almost $18 billion over 10 years – would be used for tax incentives for wind, solar and other renewable energy sources.
Big oil, in a second year of record breaking profits, has been busy lobbying against the bill in Congress. Clearly, they’ve already won over the White House.
What do you think? Should Big Oil pay up? Or should we stick to the original cuts?
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As much as I hate paying the high price of gas, I think I dislike the idea of gov’t taxing one industry differently then another even more.
When you tax something, you get less of it.
Prices at the pump will go up and revenue to the goverment will decline if the Bush veto is overridden.
Jim – isn’t it interesting, though, that the reverse is not true (and under pure economic theory, it would be)? When Big Oil made record breaking profits at the pumps last year, they didn’t give it back to consumers in the way of cuts.
ATG – Couldn’t it also be argued that the original cuts were also targeted to one specific industry (oil)? Wouldn’t reducing those cuts undo a prior wrong? Just wondering.
Kelly, keep in mind that oil company profits are taxed twice, once at the corporate level and then again when they are distributed to individuals (of which you probably are one if you have a 401 with a balanced mutual fund). This is why if the government punishes the private sector it actually costs the government money.
And of course Hillary! wants to “take” all these evil profits and use them for her pet projects. That would shut down the oil industry and throw the country into depression. But it would feel good for a while, if you are a liberal.
Politics aside, how is that different from most consumer goods?
Notwithstanding the taxation of distributions (which is also applicable to many industries), products and services are often subject to layers of taxation.
If I buy a Diet Coke, Coke has paid tax on it and I also pay sales tax. I don’t consider that a punishment on the private sector, so I’m not sure what you’re getting at…
Kelly, good point. To the extent that the ‘tax increase’ is repealing a narrowly targeted credit applicable only to oil, I’d support that – not to punish oil companies, but to put them on the same level as other companies. I’m generally opposed to any narrrowly targeted cut that’s industry specific.
Jim – yes, oil profits are mostly taxed twice (except for all the oil & gas LP’s out there), but this is the case for all dividend paying C Corps. Economically, it’s the consumer paying all these layers of tax anyway, it’s just collected via the corp.
BTW, microsoft still has a much greater profit margin then big oil.
When you raise taxes on a product, you get less of it.
Don’t cheer a tax increase on oil this week and then complain when gas gets more expensive next week.
What’s not made clear is “What is the nature of these tax breaks”? If the oil companies do not get any special tax breaks and pay the same corporate tax rate as any other company, how is this “special”?
Most of the cuts that are in question are specific to the industry – accelerated write-offs for exploration, expanded definitions of what qualifies as ‘domestic production’ and so on. I’ll put it on my list to do a further post about this.