Oil Tax Profits

SeVeR · June 9, 2008

http://www.reuters.com/article/topNews/idU...eedName=topNews

Obama proposes taxing the profits of oil companies. This is of course rejected by the conservative McCain (Bush clone?). I am with Obama on this one.

"For eight long years, our president sacrificed investments in healthcare, and education, and energy, and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs – trillions of dollars in giveaways that proved neither compassionate nor conservative,"

What are your views?

Edited June 9, 2008 by SeVeR

FMBI · June 10, 2008

I'll just summarize arguments for and against.

For :

Oil prices have increased 600% in less than a decade, while oil companies have gotten a virtually free ride.

Taxing the profits would make an example of the corporations and show that we're serious about "investing in our future."

Renewable energy investment is a gift that keeps on giving, so after we make the initial transition, we can drop the taxes (although by that time reduced demand will have weakened the companies anyway).

Taxing profits could help reduce the internal equivalent of a China/Japan trade surplus, rebalancing the economy.

Against :

Sure, oil companies have put billions of dollars into lobbying against renewable energy, sure, they're planning to destroy Alaska (BUT WE NEED THAT EXTRA 5% OF OUTPUT!), sure, they're run by greedy schmucks, but.. It isn't their fault that they're making billions in profits while the rest of the country flounders.

Oil companies will sell oil to other countries (technically invalid, as the US is by far the largest energy market, and it uses unpopular varieties like sour crude and synthetic petroleum more than other countries).

Taxing oil companies won't fix anything (again, invalid, as the massive income spike, if wisely invested [and it might be, for once], would help raise the corporate share of the tax burden that's been slipping for decades).

Taxing oil companies will hurt investment in new drilling and exploration projects (yet again, invalid.. it defies the imagination that they've managed to experience a massive, unprecedented increase in profits and yet have barely increased investment, even in an age where resource finds are increasingly rare).

I think you can tell which side I fall on, but as far as I've seen, that's the "neutral" analysis. Meaning, not the analysis where various Texas Republicans stand up and tell us again and again that they're working for "our future" and that the people who insist future growth depends on renewable energy are lying. Or where New England Democrats stand up there and promise us that they really can fix everything without giving the economy a figurative kick in the groin for a few years.

And finally.. Sever, haven't you heard the news? Corporate welfare is all a big lie. In reality, it's those darn poor people who are always stealing the m(illions?)oney from the hard-working executives. At least that's what Veg tells me.

PaRa$iTe · June 10, 2008

FOR: The oil industry can - unlike many other industries - be safely taxed, since the US is so big a market for it. They can hardly abandon ground. (Yeah, "because we can" is hardly a good argument, but here I think it's fairly valid)

AGAINST: It is very possible that taxing them would just inspire them to up prices even more, in order to keep profits stable. Sure, this would further increase the taxes they pay, giving the government more money; on the other hand, that increase wouldn't cost the company any money, since all of the money paid would be directly from the higher prices.

NBVegita · June 10, 2008

Do you realize that the oil companies make UNDER the national average for profit margin by a company? (at least as of February which is the last time I looked it up)

Tax your harvards, or !@#$%^&* even your banks that make up to near 3 times the national average for profit margins.

If a company brought in $100,000 in revenue, and had a profit of $8,000 you wouldn't call that excessive.

So why if a company brings in $100,000,000,000 is $8,000,000,000 excessive?

I say go after the banks first. Just imagine what effect dropping your mortgage rate by even 1% would have.

FMBI · June 10, 2008

Do you realize that the oil companies make UNDER the national average for profit margin by a company? (at least as of February which is the last time I looked it up)

Tax your harvards, or !@#$%^&* even your banks that make up to near 3 times the national average for profit margins.

If a company brought in $100,000 in revenue, and had a profit of $8,000 you wouldn't call that excessive.

So why if a company brings in $100,000,000,000 is $8,000,000,000 excessive?

I say go after the banks first. Just imagine what effect dropping your mortgage rate by even 1% would have.

That's sort of interesting, considering that Exxon Mobil and others have been setting all-time profit records for companies. I'd say that profits of 9-12% - which are going to soar for at least the next decade - are quite enough.

And, by the way.. Being a Republican is okay, as long as you don't swallow all the cliches they feed you. Banks have high profits from a wide variety of reasons, not least being the fact that they participated in the Bush-encouraged housing joke. And Harvard.. give me a break, conservatives have been crying about it for decades. Yes, it's hopelessly corrupt, yes, it's idiotic. Who gives a !@#$%^&*? Harvard is an emblem of the "Best higher education in the world" standard of the US (though that's questionable nowadays), and its actual income is far lower than that of companies raking in hundreds of billions. Oil companies, on the other hand, are making far more massive profits, they serve no useful "abroad" political purpose except to demonstrate American greed, and they're wasting huge resources (as opposed to Harvard, which at least still turns out very highly trained future professionals).

NBVegita · June 10, 2008

Are you insane?

Exxon posted a record high profit margin in the first quarter at 10%!

As for companies? Yet again are you insane? As early as the first quarter of 08" google posted a profit margin of 25%.

Spoiler! --Click here to view--

Bush-encouraged housing joke

lol? Yes blame president Bush for a large sum of Americans taking unsecured flexible rate and or interest only mortgages.

As for ins!@#$%^&*utions like Harvard, they don't deserve a free ride on an income/endowment of 34.9 billion dollars.

Who gives a !@#$%^&*?

I do.

Simply because you are an educational facility shouldn't allow you to dodge taxes while still charging very high tuition costs. !@#$%^&* I would even support making Harvard free, instead of taxing their exuberant income, being they only bring in about 300 million from tuition anyway.

I propose taxing bigger companies who's profits are indeed excess, not companies who just make a lot of sheer dollars.

PaRa$iTe · June 10, 2008

If a company brought in $100,000 in revenue, and had a profit of $8,000 you wouldn't call that excessive.

So why if a company brings in $100,000,000,000 is $8,000,000,000 excessive?

Thinking in percentages doesn't always work, though. $8,000 isn't that much; $8,000,000,000 is VERY much. Sure, the percentages might be the same - but $8000 a year wouldn't do anyone any good, while $8,000,000,000 a year could be split between 200,000 people and STILL be a decent yearly income (well, semi-decent). Of course, once everything goes downhill, percentages are important. But unless some very remarkable technological progress is made, oil companies will keep being profitable.

I agree that a 25% profit margin is higher. But how does Google get profits? As for the oil companies? There's a difference there. Also, oil is primary production (or whatever it's called in English), while a search engine is tertiary. Profit margins don't always work properly for those sectors - for example, the guy in the street corner who plays on the guitar with a hat upside down in front of him might have a 100000000% profit margin in case someone gave him the guitar.

NBVegita · June 11, 2008

Why does the sheer volume make a difference?

How about we tax Wal-mart, they made nearly 1.5 times what Exxon Mobile made.

Or general motors...they made more. Ford, GE and citigroup were right on Exxon's tail, how about we go after them for windfall profits?

The reason why people are mad at the oil companies is simply convenience. The media created a mob that was hungry for blood anyway and has pointed them at the easiest target. The oil companies actually have very little control over the price of gas, yet we act as if they could cut the price of gas in half tomorrow. Personally I'd rather see the mortgage rates universally drop 1% than see gas drop $1.00 a gallon.

And as for investments, as of 07" Chevron was investing just over $300,000,000 a year into alternate energy sources. As of 03" they only made 1.17 billion dollars in profit. So that means they're investing over 25% (give or take) of their "windfall" profit into alternate energy, what do you think the government would do with that money?

I know Exxon has been lax on the investment in renewable energy.

PaRa$iTe · June 11, 2008

NBVegita · June 11, 2008

The problem with that is it is completely anti-capitalism. Which the U.S. still claims to support.

If you tax based on sheer volume then you will simply have more larger companies who remain smaller and break into seperate companies to avoid taxation.

Ultimately you're stating that we should punish the business for being a big business? We should punish industry for doing a high volume of business, thus giving them a high volume of profit?

The sheer concept of taxing by volume is rediculous to me.

Under that pretense a company making a 25% profit totalling 5 billion dollars could actually make more profit than a company who makes 7 billion in profit at 7% profit margin.

The reason why we use statistics is because a company making 100 billion who only nets 10 billion in profit is far less profitable than a company who makes 50 billion and nets 8 billion in profit.

Yes they might have made record profits (sheer volume) but I bet you they spent record money (sheer volume) also.

SeVeR · June 11, 2008

If you tax based on sheer volume then you will simply have more larger companies who remain smaller and break into seperate companies to avoid taxation.

This may be a good thing as it would possibly increase compe!@#$%^&*ion, something that many people claim is lacking in the oil industry. Edited June 11, 2008 by SeVeR

NBVegita · June 12, 2008

I do actually agree with that sever...with conditions.

PaRa$iTe · June 12, 2008

Compe!@#$%^&*ion is good

My main point was that, even though profits might be the same in percentages, there's a vast difference between $8,000 and $8,000,000,000. I agree with you on the 50 million vs 100 million thing, since the profit volumes aren't that different. Just ask yourself: what do they do with the money?

On a sidenote, I don't think "It's against government policy" is a problem as such if the whole discussion is about doing something the government hasn't done before.

NBVegita · June 12, 2008

Yes there is a big difference between 8,000 and 8,000,000,000, but there is also a big difference when your company has to spend 100,000 or 100,000,000,000 to make that profit.

The biggest problem I have with taxing simply by volume is that it discourages a company from being big, not even efficient, just big.

Also on a side note it wouldn't neccesarily encourage compe!@#$%^&*ion as enron could break into dozens of smaller companies all owned by the same people, all doing the same thing.

Ultimately we're trying to stop corporations from sending jobs over seas, but if we tell them that if your company is in america and you make X dollars, we're taxing 25% of that, why would they keep jobs and companies here? If I owned a large company and you tried to tax me for running my company too well, I'd look into moving my company to a different country.

Now I would support giving tax breaks to companies who are as domestic as possible or increasing taxes on companies who outsource to cheap labor. I think that would benefit our job market/economy far more than taxing enron another 25%.

Part of that also stems from the fact that I don't trust our government now, under McCain or Obama to take the extra money from taxing the oil companies and do something useful with it. Yet if we can set regulations that encourage more jobs to stay in America that is something that benefits the people with minimal government error/intervention.

PaRa$iTe · June 14, 2008

The thing is, US is their main market, and also an area with oil resources. They simply can't outsource everything.

And yeah, I agree that giving tax breaks to domestic companies could be a good idea. Not increasing them for the outsourcers, though; they would just solve the problem by outsourcing even more. The problem is, this kind of protectionism could cause similar reactions in other countries, limiting export. The multinational companies would no doubt do their best to prevent that kind of legislation; limiting their export possibilites and at the same time punishing them for abusing cheap labor?

Confess · June 17, 2008

Heres my concern - The oil companies have gained a monopoly in my opinion - Now, before America has broken up monopolies (major companies...ie SBC) - and yet they wont do it for something as basic (atm) as oil?

Back in the 50-60s or something - the congress SET A LIMIT on the price that we would pay for gas/oil. Around the same time - truckers protested by lining the highways/streets/etc with their trucks not allowing anyone to get p!@#$%^&* them - which brought the gas prices down VERY significantly..

Now why isnt any of this being done TODAY?

Aileron · June 17, 2008

You know, I miss the good old days when politicians would simply lie to us and tell us they'll lower our taxes when they won't, rather than this whole 'demonize this group so we can raise taxes on them and get kudos for it' scheme.

darkhosis · June 17, 2008

i didnt read all the replies, but the oil companies are just maintaining their profit margins. as the cost of oil goes up, so does their profit, since they keep the same profit margins.

but more money for oil companies isnt so bad, since it opens more exploration and deep/sea type exploratory drilling, for more oil. shrug.

**Bak** · June 17, 2008

tax churches lol

Confess · June 17, 2008

Theres no reason to add taxes untill they can learn to support themselves with the TRILLIONS of dollars they get ATM.

**Dav** · June 17, 2008

You know, I miss the good old days when politicians would simply lie to us and tell us they'll lower our taxes when they won't, rather than this whole 'demonize this group so we can raise taxes on them and get kudos for it' scheme.

at least people know what to expect and can prepare accordingaly.

Trouble with this is that the oil companies will p!@#$%^&* the cost onto the consumer, however it in turn will aid the drive to green technology making it more cost effective provided promises of its devolpment are kept.

darkhosis · June 17, 2008

nuclear power plants.

**Dav** · June 18, 2008

nuclear power plants.

ZOMG TOXIC WASTE WILL KILL US ALL!!!

ok now we have the irrational argument out of the way lets have the rational one.

Nuclear power emits far less carbon per Kwh then fossil fuel by a considerable margin, they also produce far less of other pollutants !@#$%^&*ociated with fossil fuel.

They are many times more safe than the ones that have gone through melt down in the past, odds of it occuring are too low to be of significance in a modern system.

The waste can be safely contained, and the cost of doing so is justified by the fact that it is still cheaper then fossil fuel, and the price of the power generation is less likely to spike like it does with oil.

security and fail safes are such that they will not make a viable terrorist target.

Renewables cant be used to get rid of nuclear entirely as large scale power stations are needed to input a base level into the grid to meet minimum requirement, renewable can provide a lot of energy but the output is too variable to rely on completely. for instance no wind means your wind turbines arent working, and clouds reduce output from solar arrays.

SeVeR · June 19, 2008

Agreed. Anyone who is against nuclear power is a brain-washed, liberal, environmentalist, hippy. This coming from someone who is liberal, environmentalist, but also a scientist, i'm not just saying it because of political differences.

Does the profit margin take into account the amount of money given to "executives" in bonusses?

Confess · June 19, 2008

Lemme tell you a story:

A while back, here in Kansas - it was put up to a vote. The question was: Can we build a nuclear power plant? They fed us that "It will drastically decrease your power bill"/etc. Well, instead of DECREASING, in many ways it probably increased our cost via taxes. Why did it do that? Because instead of them using the power to supply Kansas houses with power - AS was supposed to happen - they started selling the power to Texas!

This is why im against building nuclear power plants - because the greedy sons of !@#$%^&*es will do anything to make money. And, if they are this stingy + greedy - whats to say that they wont put US at risk?

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