Looking After Corporate Masters
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I think it’s safe to say that no one really likes big oil companies.
Certainly not the people who glumly watch the total on the gas pump go higher and higher as they fill their tanks, the numbers increasing so fast they seem to blur.
Certainly not the people of America’s Gulf Coast who are still suffering from the effects of the largest oil spill in U.S. history, a disaster of biblical proportions that was highlighted by a top oil executive whining that “he wanted his life back” and a Republican congressman from Texas apologizing to BP because he felt the government was being mean and hurting their delicate feelings.
So it’s always been a source of puzzlement to me that more people aren’t teed off at the massive tax subsidies our government gives to these corporate behemoths, especially in this deficit-obsessed era.
Even though the big five oil companies — BP, Chevron, ConocoPhillips, ExxonMobil and Shell — made a total profit of nearly $1 trillion over the past decade, oil companies continue to receive a variety of tax breaks for such arcane things as “intangible drilling costs,” “marginal well production” and “percentage depletion allowance.”
Some of these date back to 1916, when the government was trying to get the fledgling auto and oil industries off the ground and gain wide acceptance for the automobile as the primary mode of transport. I think we can safely say mission accomplished. But the tax subsidies remain.
President Obama has proposed, and Senate Democrats held hearings this past week on, proposals to eliminate $46.2 billion in oil and gas tax breaks over the next 10 years. Of course, the oil companies weren’t going to take that lying down. Spokesmen for the oil industry and the Republican caucus (as if there’s much difference) immediately claimed that repealing the tax breaks would lead to higher prices at the pump.
One of those making the claim, it should be noted, was a spokesman for Speaker John Boehner, who’d previously claimed he was “open” to the idea of doing away with the tax breaks. An executive from ConocoPhillips (which reported $95.32 billion in profits in 2010) went further: He called ending the tax breaks “un-American.”
Well, from his perspective, he’s right. After all, in his America, there’s nothing more patriotic than giving a bloated multinational corporation anything they want anytime they stamp their feet and pout, as long as we can make up the difference by cutting aid to the poor and destroying Medicare. From where he sits, that’s as American as apple pie and baseball. To these people, America and its government exists to serve them.
Here’s another thing. I am sick to death of these bloated tycoons holding a gun to the economy’s head every time it looks like they’re going to have to pay their fair share or clean up their mess. “Nice gas price you got there, be a shame if anything happened to it.”
I mean, really. Is anyone really stupid enough to believe that oil companies are going to stop drilling if they don’t get a massive tax subsidy for doing so?
I suppose there is one group who actually likes the oil companies: the people who work for them. Unfortunately, that includes a sizable chunk of our Congress, including DINOS (Democrats in Name Only) from oil-producing states, such as Louisiana’s Mary Landrieu (who’s taken $3 million from oil and gas companies) and Alaska’s Mark Begich (who’s only prostituted himself to the tune of $140,000, but he’s still pretty new to the game).
They, too, are acting as if they expect us to believe that the oil companies will just take their multibillion-dollar ball and go home if they don’t get their tax subsidies. Of course, they may not actually like Big Oil; but they sure do smile pretty and say the things their oily “clients” like to hear.
Will the Republicans and a couple of turncoat DINOs manage to derail the president’s attempt to get the oil companies to pay a reasonable amount of taxes on hundred of billions of dollars in profits?
Sad to say, it’s entirely possible. Because to them, the deficit’s big enough to justify balancing the budget on the backs of the poor and the old, but there’s no deficit, ever, big enough to justify inconveniencing their corporate masters.
Dusty Rhoades lives, writes and practices law in Carthage. Contact him at dustyr@nc.rr.com.
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Comments
OldPilot 2 years ago
Well said, and it isn't just the oil companies, although they, and GE, are excellent examples.
RmeMP 2 years ago
i can not understand why those like dusty hate the oil companies so much; if you dont like the price of oil, take a look in the mirror for the cause of high prices - not the company who supplies the product.
hear me out...
first off, there is that pesky little economic 101 thingy called, "supply and demand" - we as americans demand ALOT of gas - and when the government regulates the industry to death as to how much they can supply, what do you think is going to happen?!
second, why are you crying about the oil companies getting the EXACT same subsidies that other companies are entiltes to - what dusty isn't telling you, and quite frankly what alot of ignorant people don't know, is that the "subsidies" that people like him want taken away from the oil companies, are not exclusive to the oil industry - they apply to a wide range of companies; those who blame "big oil" for gas prices (wrongly so) simply don't think it's "fair" that these companies are enjoying huge profits.
lastly, instead of blaming the oil companies for the high prices, why not blame the ACTUAL reasons - and stop "hating" just because someone besides yourselves is getting rich... why are the gas prices high? i'll tell you:
dustyrhoades 2 years ago
what dusty isn't telling you, and quite frankly what alot of ignorant people don't know, is that the "subsidies" that people like him want taken away from the oil companies, are not exclusive to the oil industry - they apply to a wide range of companies;
So? Those companies shouldn't get tax breaks either if they're making a profit without them. I don't have a problem with companies making a good profit; what I have a problem with is them demanding we subsidize it and crying they won't be able to survive without being propped up by the taxpayer, which is pure BS.
RmeMP 2 years ago
so you're saying that NO company should get subsidaries if they are profiting, right?
but based on what? a month to month basis, or at what profit percentage should we pull the subsidaries?
just because they are up this quarter, does not mean that they will be up next quarter correct?
you said that they are claiming, "we won't be able to survive without being propped up by the tax payer" - this is a totally false statement (unless i missed it), what i heard them say is that if the subsidies are pulled, it will only further increase the price at the pumps, and THAT is why it would be a bad idea...
wouldn't you agree that if that is the case, then we shouldn't do it?
dustyrhoades 2 years ago
Oil companies always make a profit. Always. They will be up next quarter, and the quarter after that, and the quarter after that. Other industries may get tax breaks if they're in trouble, on a case by case basis. But to say "we need to keep subsidizing very profitable companies with tax breaks" is ridiculous.
And the oil companies are using the threat of "prices at the pump" to scare us into anything they demand, and I think we need to stop listening to their empty threats. They'll drill as long as there's oil to be sold, tax breaks or no tax breaks.
SnakeFlag1 2 years ago
That sounds like a great plan -- the IRS will "means test" all companies before they decide whether to tax them or not.
SH59 2 years ago
Any other businesses whose product is decreasing in demand as a result in higher prices usually does some cutting back and tightening of the proverbial belt. The oil industry seems to think they don't have to do that, they can just raise their prices. I think it's time the oil consortium needs to be broken up and stop being a monopoly. I'd like to see where the prices level out to then with a little competition.
RmeMP 2 years ago
you sir or ma'am are simply wrong... the demand for oil IS NOT decreasing as you stated, and you are also wrong in ASSUMING that the "evil oil companies" set the price at the pump - why don't you try educating yourself in the subject at hand before making flat out ignorant and incorrect statements - for all they do is show that you don't know what you are talking about...
SH59 2 years ago
Then why do the prices go up every time there's a hurricane, flood etc... They've been doing that for quite a while and are now threatening to raise prices because we want to take away the tax breaks?
JK 2 years ago
Mr. Rhoades,
Good Column. The market should drive decisions for companies to use their profits for further research, not whether they are recieving tax payer funds. That said, the government has no place attempting to regulate prices for goods and services (gas), supply and demand should…
buddysmith 2 years ago
Let me get this straight? would eliminating the tax subsidies for oil companies mean they would earn less in a given quarter? If so, why wouldnt they pass the cost on to the consumer? I say they would, so goodbye 4 dollar a gallon at the pump and hello 6 dollars!! I think a basic function of any business is to charge more for their product, as the businesses operating cost goes up. Am I missing something here?
DaveyNC 2 years ago
OK, this hurts, but I am going to agree with Dusty. Sort of. I don't have any particular animus for oil companies; I think that in a time when so many American companies are under attack from foreign competitors, we are fortunate to have strong, successful oil companies. I don't understand the hatred for companies that enable our relatively luxurious lifestyles.
But I hate subsidies. Subsidies for anything drive the price of that thing up. Health care, education, homes, sugar, cotton, corn--all of these things carry subsidies with them and all of them cost more because of it. Ever notice that every time more money is made available by the government for college, tuition goes up? We have massive subsidies now for corn-based ethanol and now the price of corn is skyrocketing. Sugar has had a subsidy since forever. What is the home mortgage interest deduction but a subsidy? And we all know how that ended.
Get rid of 'em all. That gets the government out of the different markets and creates a more honest market.
moonchild7 2 years ago
Not sure I still have a "voice" since many of my comments lately aren't being posted here but I'll give it a try. WALL STREET with it's GAMBLING networks of HEDGE FUNDS are driving up the price of oil. Supply and Demand are "antiquated" economic principles and have been shelved. And TAX SUBSIDIES for corporations? Criminal. That's all I'll say for now.
Ross 2 years ago
jimmie - don't be bitter about that "F" you got - it was a long time ago!
buddysmith 2 years ago
If there were no subsidies given to oil companies, what would happen to the price for a gallon of gas? Interesting question, maybe an economist reading all this can help??
honesty2 2 years ago
I'm not big on subsidies either. However, oil companies earn far less % of profit than many other companies. For instance, Exxon earns an overall profit of 8% from business worldwide. They get about 2 cents profit per gallon of gas sold. Crude oil takes up 65% of the cost at the pump and refining and distribution 22%, then you have state gas taxes.
Apple, on the other hand, sells an IPad for around $499 but goods/materials cost them only $270, or a 42.9% profit.
dustyrhoades 2 years ago
Is Apple getting a tax subsidy?
honesty2 2 years ago
I've already stated that I don't care much for federal subsidies, and I think the CEO's salaries are extreme. But why are you focused solely on the oil companies? What about farm subsidies, housing subsidies, subsidies to Fortune 500 companies, phone companies, etc.? Do you then cut all subsidies?
Also, while I'm defending oil companies, I think people need to see how it breaks down. Notice 13% of what you pay is in taxes, versus 2% profit for the company. Just find that interesting.
moonchild7 2 years ago
Exxon's CEO "earned" a total compensation package for 2010 of $29 million. His "earnings" are up 6.6%.
RmeMP 2 years ago
what's your point??? let me get this straight - you're mad because someone, besides you, is getting rich? nice....
i find it interesting that you put "earned" in quotes, like as if that person didn't have to work hard to get where they are - and probably DESERVE to be rich...
buddysmith 2 years ago
havent you noticed from other posts that moonchild is a socialist? how dare anyone that has shown initiative and drive to suceed in life be allowed to earn money. we need a government that continues to give more "stuff" to people that have never done anything, or will ever do anything. with their lives. in some peoples eyes, rich people are just lucky, no one deserves to be able to earn 29 million dollars a year, right?
SnakeFlag1 2 years ago
While we are at it, we need to bring movie stars and basketball players down a notch or two. Key their salary to other responsible executives -- like maybe the Aberdeen Postmaster.
honesty2 2 years ago
I agree. We need a new tax system.
buddysmith 2 years ago
We also need to abolish the earned income tax credit. Nobody should get a larger tax refund than they paid in!
irkim13 2 years ago
I heard an interesting statistic on Friday that "big oil" earns 2 cents per gallon and the government takes 48 cents per gallon.
moonchild7 2 years ago
Crude costs 62% for the refiners to buy, the cost of refining is 15%, Taxes are 12% and the Distributors get 11%. Those statistics come from everyone's favorite place, THE ENERGY DEPT, and just for you James that does come out to 100%.
marathonman 2 years ago
This is not a capitulation but......I do agree that the oil companies pay their executives entirely to much. If there is that much left in the profit margins, then we all deserve a kick back on what we have paid. The oil industry wastes money just as the Federal Government wastes money. The answers to why and how are very complex but have to do, I believe, with inefficiency or a lack of doing it with efficiency. Thus they do things over and over at a high cost. If we shrink Federal Government, and we should, and we demand more over sight of the way in which the oil companies do business, we should see prices go down and maybe, just maybe, our debt ceiling can be decreased and our currency again stronger than the Euro, for example. Now concerning energy independence..........
moonchild7 2 years ago
It is really amazing how some people can so easily be CONVINCED that it's okay to "give" to FORTUNE 500 Corporations FEDERAL TAX BREAKS of $21 Billion...But it's absolutely reprehensible to give food, shelter and a little spending $$$ to the poor and needy. Exxon Mobile made $9.25 Billion last year so it's just fine to pay their CEO $29 Million for his "Leadership" as long as the stockholders and Board of Directors agree. What is NOT FINE is that we the Little Taxpayers of America are helping to SUBSIDIZE that AMAZING SALARY! He even had the nerve to tell Congress that they still need that money! I'd rather the guys out on the offshore oil rigs, and gas stations got to divide up that $29 million. I've seen how and where a lot of those type CEO's live and it's rather self-indulgent.
Bflat 2 years ago
Let's consider some more on all this. Are there other industries more profitable than oil? GE for instance is one of the most profitable in the world and its CEO sits on Obama s board of economic advisors. How many investors living on a fixed income got distribtuions of oil profits ? Profit is figured before any distribution of dividends. If anyone wants to see the price of gas drop substantially,get all of those state and federal excise taxes removed from each gallon!.
sgmartin 2 years ago
Help me understand why any profitable industry should get a subsidy? What happened to the free maket system?
Courseaire 2 years ago
You all are mistaking "Subsidies" with "Tax Breaks". Farmers & such get subsidies to not produce a certain type of crop. For example, they get paid not to plant corn, while being allowed to plant wheat to harvest, sell & make $$. The Oil companies as well as many other businesses take advantage of the current Tax Law. The Oil companies and the other businesses use these tax breaks to reinvest in their business. "Further, the industry still pays an effective tax rate of 48.4 percent, compared with 28.1 percent for all other S&P Industrials, according to economist Mark J. Perry"
Profitable businesses with tax breaks stimulate the economy while non-profitable businesses that pay no tax will be subsidized by you. . Reference: Website: heritage.org/Research/Reports/2011/05/Whats-an-Oil-Subsidy and the nationalreview.com/articles/267207/end-big-oil-subsidies-david-harsanyi
moonchild7 2 years ago
I believe I've read somewhere(probably in that College Economics Class I took yrs ago)that a "NON-PROFITABLE" business is essentially a business that is no longer a business. The Government only gives a busines 2-3 yrs to become PROFITABLE and LEGITIMATE. Where did the idea that propping up Bankrupt Companies was the thing to do or way to go? If propping up Chrysler back in the 70's was the model it failed miserably years ago. AMERICANS seem to never learn.
Courseaire 2 years ago
Actually, many "NON-PROFITABLE" ("NP") companies stay in business for many years. Because of Tax Breaks these are usually paper losses. Hence, Americans have learned - if a NP continues to operate, people are employed & paid, the owner still earn income and a product is made & sold benefiting the consumer. This may not fit the Economic model you learned in college, but it's what happens in real time. Should any of these companies get too far in debt, they can file for Chap 11 bankruptcy, have their debt forgiven and continue in business (maybe profitable, maybe not).
Bflat 2 years ago
:"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy." _Winston Churchill.
BornAndBredHere 2 years ago
Exxon made a record profit of $45.2 BILLION dollars in 2009 and paid the MOST taxes of any corporation. That being said would anyone care to venture a guess as to how much of that sum went to the IRS?
ZERO. ZILCH. NADA. the big capital 0.
the Government Accountability Office reported that in 2008 corporations such as exxon and others that use "legal" tax shelter practices shifted a $100 billion tax burden to the american tax payers. I am in favor only for temporary tax breaks for companies that create new jobs such as building new plants, etc. never for companies like exxon and the other oil giants who have never come close to taking a loss like many other businesses in today's enviroment. Can anyone remember the last year exxon didn't make "record" profits? do they really need our assistance. if you think so you are nuts.
RadioNC 2 years ago
For those who came in late...Corporations NEVER pay taxes. They are passed on to the people who buy their product in the form of higher prices. Economics 101: When you raise taxes on corporations you are just raising taxes on yourself. Only people pay taxes.
RadioNC 2 years ago
I'm so glad Dusty that you are so passionate about that which you believe, however that which you believe just isn't so. You point out that the oil companies made $1 trillion during the last 10 years but you failed to mention that the same oil companies, whose stock is owned by everyday Americans, spent $950 billion to make that 5 percent profit. During the same time period, the average investor in the stock market made 100 percent return on their investment. I don't see you jumping up and down about that. Once again you have opened your mouth and removed all doubt.