America's Most Obvious Tax Reform Idea: Kill the Oil and Gas Subsidies

[xchrom]

http://www.theatlantic.com/business/archive/2013/03/americas-most-obvious-tax-reform-idea-kill-the-oil-and-gas-subsidies/274121/



When Saudi Arabia's longtime oil minister, Ali Al-Naimi, opens his mouth, the world listens. Yesterday, during a speech in Hong Kong, he delivered a message that U.S. policy makers in particular would do well to take note of. The days of $100-a-barrel crude, he told the crowd, are here "for the foreseeable future."

If he's right, one thing that shouldn't be around for the foreseeable future are the outdated tax credits that protect oil and gas companies, which will be plenty profitable in a world of $100-a-barrel oil. If Democrats and Republicans are looking for safe ground to set up camp for the budget negotiations, let's start with these $7 billion-a-year subsidies.

Why Big Oil Doesn't Need Uncle Sam's Help
The oil industry's lobbyists like to argue that its array of tax write-offs (which allow companies to deduct everything from drilling costs to the declining value of their wells) aren't any different than other deductions for less publicly reviled companies. Cutting them will discourage new exploration and put jobs at risk, they claim.

Yet, some of the breaks are anachronisms that date back almost to the days of John D. Rockefeller. And in a world of permanently high crude prices, there's very little rationale for subsidizing the bottom lines of companies like ExxonMobil and BP.

[HiPointDem]

1. kr

[idwiyo]

2. K&R

[Scuba]

3. Very telling that these subsidies still exist.

"Of the People, by the People, for the People"? Ha!

[valerief]

4. But a few rich people might lose money and making rich people richer is the most important thing in

the world.

[Locrian]

5. totally agree...

Except the oil/gas etc indu$try will go on the attack. As will all the idiots who post crap like this on Facebook etc:





It's another example of the ways that corporations have turned the government into their slave. And with the help of the "news media" etc (other gigantic corporations) they direct public opinion.

So yes, obvious - great idea - but not easy.

[The Wizard]

6. They have the best

legislators money can buy on the payroll. Nothing will change without drastic measures like public horse whippings of select legislators and those who bribe them.

[Dustlawyer]

9. The bribery is legal, it's called campaign contributions! We need complete campaign finance reform!

[RockaFowler]

7. This seems so outdated

But of course we can't give up their subsidies. Let's make sure Grandma gets kicked out of Medicare. That makes more sense

[EC]

8. Yes,

And another that should be obvious is why should I be paying for some rich guys jet fuel? If he can't afford to fuel and maintain ones own plane, they shouldn't have one.

[BadgerKid]

10. I'd like know if subsidize companies sell processed oil overseas profitably.

My hunch is that this is the case.

[FreeJoe]

11. Yes and No

We should end subsidies to the oil and gas industry, but much of what is referred to as a subsidy really isn't. An example you listed is the ability to deduct drilling costs. Those are business expenses, so of course they are deductible. That's like denying a grocer the ability to deduct store construction costs. We tax corporate income, not corporate revenue.

I think that a better idea would be to listen to virtually every economist and drop the corporate income tax. Corporations don't be pay taxes. People pay taxes. Instead of having corporations collect the taxes with a corporate income tax, we should tax the shareholders based on their share of the corporate profits. That way a person's share of corporate profits would be taxed at their tax rate. Instead of having a single tax rate for all shareholders, we can tax the rich and the non-rich's shares of corporate profits at different levels.

We also need to fix our insane practive of taxing domestic profits but not foreign profits. Today, if my corporation earns money in a low tax country, it would pay a hefty US corporate income tax if it brought that money back to the US. Obviously, it avoids doing that by investing the money in places other than the US. Even worse, copanies regularly engage in scam transactions to transfer intellectual property ownership to their foreign affiliates to make US earnings appear to be foreign earnings so that they can avoid taxes on those earnings (as long as they don't bring that money back to the US). It would make more sense if we taxed the companies worldwide profits as shareholder income.