Sunday, May 08, 2011

Oil Companies. Tax Cheats or Boogieman?

In this troubling economic times, the government, instead of admitting their own malfeasance and years of mismanagement by both parties, and continuing their assault on business, businesses that create millions of decent wage jobs, have began calling for an end to Oil Company Subsidies.

Right away, with the crafty and misleading use of the word “subsidy,” that conjures visions of cash payments from the government to the oil companies, a false impression is created. The oil companies receive no payment from the government, but like other companies, receive some tax breaks to recoup some expenses and in turn, create or maintain more jobs.

Replying to Obama’s calls to “eliminate unwarranted tax breaks for the oil and gas industry and use the dollars to invest in clean energy,” Republican Speaker of the House, John Boehner said that cutting the subsidies to oil companies is “certainly something we should be looking at,” adding, “We are in a time when the federal government’s short on revenues. We need to control spending, but we need to have revenues to get the government moving. They ought to be paying their fair share.”

“Paying their fair share?”

Oil giant ExxonMobil is often the target of government with claims of they paid no taxes in 2009, a claim even Politifact declares FALSE!

CNN Money clarifies the claim by telling us,
“Exxon doled out more than $15 billion in income tax payments to foreign countries last year. U.S. tax codes allow companies to take massive deductions in light of those international charges, which knocked Exxon's federal income-tax bill down into negative territory.”

“That said, Uncle Sam gets his money in other ways. Including sales taxes and duties, Exxon recorded $7.7 billion in U.S. tax costs last year, and paid even more overseas.”

“Its grand total in global taxes for the year? A whopping $78.6 billion. The company's effective income tax rate was a hefty 47%, its highest in three years.”

ExxonMobil clarifies it further with,
“During the first quarter of this year, our U.S. operating earnings were $2.6 billion. The rest of our earnings – more than $8 billion – came from operations in more than 100 countries worldwide.”

“Here’s a number you won’t hear in Washington: During the first quarter, on those U.S. earnings of $2.6 billion, we incurred tax expenses in the United States of $3.1 billion. That’s right – our U.S. tax bill was higher than our U.S. earnings.”

“That includes income taxes, sales-based taxes and others such as property taxes. But it doesn’t include royalties or lease payments we pay to the government to produce oil and gas on government-controlled lands, which would make the government’s take from our operations even bigger.”

“Another number you won’t hear in Washington, which also puts our earnings into context, is our earnings relative to our sales. During the quarter, we made about 9 cents for every dollar of sales, which is about average for U.S. industries. We earned $10.7 billion in worldwide earnings on worldwide sales of $114 billion. That’s about half (or less) of what companies in pharmaceuticals or computers make, just to name a few. But strangely, there’s not much talk about reducing their tax deductions.”

As can be seen, there is no “tax cheating” going on. They actually pay more than their “fair share” in taxes while enjoying the same tax breaks given to other multi-Billion Dollar companies like Boeing and Microsoft.

We also should not forget that the oil companies hold leases to federal lands for exploration and drilling and pay Millions of Dollars for those leases when at the same time, permits from the government to actually use those lands are scant.

The favorite boogieman claim now is to blame the oil companies for the high gas prices we see at the pumps, insinuating price gouging. Several times such claims have been made and investigations held to make the oil companies seem at fault. Politicians have staked their careers on such boogieman claims. The New York Times, in a May 2007 article even asked, Oil Price ‘Gouging’: A Phantom Menace?

As the canard of government subsidies to oil companies if costing the country to lose Billions of dollars in revenue is continued, ignored is that petroleum remains our most effective, efficient and economical source of energy.

Looking back to Obama’s call of, “use the dollars to invest in clean energy,” another New York Times article from December 2010, Federal Money for Alternative Energy Is Drying Up informs us,
“The renewable energy sectors — including companies that make technologies for wind, biofuels and solar energy — depend on government subsidies. The solar industry, for instance, relies almost entirely on government dollars. The Cape Wind project, which appears close to becoming the first offshore wind farm in the United States, will rely on government loans to make up at least some of the $2 billion it needs to get started.”

Additionally, the article continues,
“the dependence on government has become more apparent as venture capitalists and private equity firms reduce the number of companies they are willing to back.”

That tells me that not only are these alternative sources unreliable, they are a bad investment that investors see will not give them adequate return on their investment.

And, Obama desires to send more of our tax dollars to them and cut the tax breaks to oil companies that do supply millions of jobs as well as dividends to our pensions, 401Ks, mutual funds and stock holders?

We cannot forget that recently, Barack Obama travelled to the country of Brazil, after they were given $2.5 Billion of our tax dollars to subsidize the exploration and drilling of their oil finds, and telling them that America desires to become one of their biggest customers for that oil.

About the same time he spoke to Brazil, he returns to America where he announces “the goal is to cut the 11 million barrels of oil the United States imports each day by one-third in the next decade or so

Every president since Richard Nixon, when we experienced the Arab Oil Embargo of 1973 has spoke of ending our dependence on foreign oil. At the same time, politicians have made it more difficult for the oil companies to supply us with our own natural resources.

Promises of “green jobs” from “green energy” remains a pure fallacy as alternative fuels remain overly expensive and unreliable.

Ending the tax breaks oil companies and many others receive will not only drive up the cost of gas and drive unemployment higher, it will leave us more and more dependent upon foreign oil.

That would send profitable oil companies into a spiral downward, much as we saw with the auto manufacturers. And then, government can step in just as they did with 2 auto giants and nationalize the oil companies, placing them under government control, which I believe just might be the real reason they need to portray the oil companies as the boogieman.

Of what benefit to America would that be?

Absolutely none!

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