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Author Topic: Happy 100th Birthday, Big Oil Tax Breaks
raybond
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Happy 100th Birthday, Big Oil Tax Breaks

By Rebecca Leber on Mar 1, 2013 at 10:38 am


Automatic across-the-board budget cuts will take hold on Friday, affecting job growth, state education programs, environmental agencies, and women’s health programs. The sequester actually shares an important anniversary — with Big Oil tax breaks. It is not as well-known a date, but one type of deduction, the percentage depletion allowance, celebrates its 100-year anniversary today.

Depletion allowances let oil companies treat the oil in the ground as capital equipment, and thus allows them to write off a certain percentage for each barrel that comes out. (See more here.)

The year 1913 marked the first time a Big Oil subsidy was written into the tax code. The Revenue Act of 1913 allowed oil companies to write off 5 percent of the costs from oil and gas wells beginning March 1 of that year. (For reference, see pages 172-174 of the Act.) A century later, oil companies can now deduct three times this rate, at 15 percent, although the very largest companies no longer qualify. The percentage depletion subsidy also increases when prices are high, at the same time that oil companies enjoy greater profit. It can even eliminate all federal taxes for independent producers.

A Center for American Progress report estimated that closing this tax break would save $11.2 billion over 10 years.

President Obama has called on Congress to eliminate the percentage depletion allowance, along with a series of other tax breaks totaling $4 billion annually. Even Ronald Reagan once asked for the same in a 1985 speech on tax reform:


“Under our new tax proposal the oil and gas industry will be asked to pick up a larger share of the national tax burden. The old oil depletion allowance will be dropped from the tax code except for wells producing less than 10 barrels a day. By eliminating this special preference, we’ll go a long way toward ensuring that those that earn their wealth in the oil industry will be subject to the same taxes as the rest of us.”

However, congressional Republicans taking the lion’s share of oil and gas industry contributions have refused to close century-old loopholes in order to raise revenue. A number of specialized Big Oil tax breaks allow the top oil companies to cut their tax bill dramatically, sometimes half (or less) of the top corporate rate. It is not as if Big Oil is struggling: Last year, the five largest oil companies — BP, Chevron, ConocoPhillips, and ExxonMobil — earned $118 billion profit at a time when consumers paid record-high gas prices. This haul follows after a year the companies earned a record $137 billion profit.

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Upside
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Ray,
Because of a tax loophole my business was able to show a profit of zero this year. We actually had a very profitable year and while not on the scale that your article references, we nonetheless deprived the government of a good chunk of change. Instead of me sending x amount of dollars to the government my business has retained those dollars to do with as I see fit. Maybe use them to grow the business, bonus them out to the employees or put them into my wallet, it's entirely up to me.

I'm assuming you view that as wrong somehow. Are those dollars really better off in the hands of the government? Wouldn't that money be more useful in an effort to grow a business or to benefit the people in that business?

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glassman
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the way that you ask the question actually shows how disjointed our society has become Upside. please do not take offense to this becuase it isn't about you or or your business, but why do you beleive that "the governmet" is not there to make sure you can run your business successfully? or that you have no stake in the governmetn at all?

it's a rhetorical question because if you don't pay the govt to do it's job FOR YOU it won't be able to do it's job for you.

i recognise that the the govt is so screwed up that you do not feel as tho it does represent YOUR interests anymore... i even know how and why this is happening, the govt is no longer accountable to teh people, and that is because the govt sees itself as the boss.

the sad truth is that all of these Tparty bozo's only want to be The Boss again, they are not really trying to cut govt, they are only trying to cut a Govt run by Democrats. whent hey get power back? they'll expand GOP (TParty ) govt again, just like they did last time they were in power...

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glassman
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BTW? it is your obligation to your business and your employees to take every tax advantage you can. it does help ensure you success over your competitors...

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raybond
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Upside I am happy that you got such a good tax break I don't know what bussiness you have or what the tax law is that helps you. And I am sure that you don't have the same statis as the oil industry. You may be aware of the old saying about assume.

Now that being said I do have a gripe about the oil industry still getting tax breaks that they did twenty years ago. When I pay almost $5.00 a gallon for gas and the oil companies are making the largest profit in the history of corporate America,why would they get a tax break of 10billion dollars when we are have a budget crirsis?

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Upside
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quote:
Originally posted by glassman:
the way that you ask the question actually shows how disjointed our society has become Upside. please do not take offense to this becuase it isn't about you or or your business, but why do you beleive that "the governmet" is not there to make sure you can run your business successfully? or that you have no stake in the governmetn at all?

it's a rhetorical question because if you don't pay the govt to do it's job FOR YOU it won't be able to do it's job for you.

i recognise that the the govt is so screwed up that you do not feel as tho it does represent YOUR interests anymore... i even know how and why this is happening, the govt is no longer accountable to teh people, and that is because the govt sees itself as the boss.

the sad truth is that all of these Tparty bozo's only want to be The Boss again, they are not really trying to cut govt, they are only trying to cut a Govt run by Democrats. whent hey get power back? they'll expand GOP (TParty ) govt again, just like they did last time they were in power...

Of course there's no offense taken Glass.

I realize that the government is a necessity and no, I don't want them to go away, they're the reason I was able to pay no taxes this year. It was a tax deduction signed into law by Obama under his small busuness jobs act. It's section 179 of the IRS code and it's an example of the government at its best. In a nutshell I can purchase capital equipment and write the entire purchase price off in the first year, reducing my taxable income to nothing.

Going into the 4th quarter last year it was obvious that in spite of business conditions we were going to make a substantial profit. In all honesty it was due to dumb luck, not my stellar management skills. A major manufacturer in the area moved their production departments from other plants into our local area and we benefited greatly. Anyway, we took advantage of the Section 179 tax code, bought a new delivery truck and a new $75,000 band saw and reduced our profit to zero. That's an example of the government working properly, they'll reap long term rewards for their short term hit.

The sad thing is that programs like that are far outweighed by unnecessary government intrusion into businesses just like my own. I think you know that I own a steel service center, we warehouse the raw material in all of its various shapes, sizes and alloys and sell it to manufacturers, tool and die companies, job shops, etc.

That same company that just moved some of its operations here recently needed a small piece of floor plate just to patch a small section of their plant floor that was wearing away in front of a machine. Simple thing, purchase the needed size of floor plate, weld it into place and they're done, right? Oh no, a 10 minute fix for them turned into a three week long fiasco. Because they do business with the government the piece of material they needed had to be up to our governments standards. At first it had to be certified as domestic material and our stock wasn't, it was produced in Mexico. Since it was for maintenance/repair work they were eventually able to get it approved as NAFTA produced material. From there we had to certify that it was in compliance with all DFARS regulations and that it met all of the federal RoHS requirements. All of this had to take place before we even touched the material to cut it to their required size. Once all of the needed paperwork was finally in place they were able to release a purchase order for their 30 dollar hole patch.

I understand the need for regulations and certification of material. It insures that proper material is used for a particular application and attempts to boost domestic production. In a case like this though it forced a company to shut down a machines production for three full weeks just to patch a hole in the floor.

Unfortunately that's happening more and more. As the government grows larger and more businesses are contracting with them they're all becoming bogged down with unnecessary government mandated paperwork. It's a true deterrent to productivity, maybe well intentioned, but a business killer nonetheless. It's one of the main reasons I'm politically torn. Parts of me favor a Libertarian stance while others lean towards Democratic. The Republicans used to be the party that bridged those two extremes but now they're directionless. More and more it looks like going forward our choices will be limited to one of two extreme viewpoints, neither one of which actually works.

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glassman
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excellent case in point. that hole patch job is exaclty why we have begun to fear and question our govt.

it's amazing to me that there's even a question about domestic or foreign "capital investments" in a 30 dollar repair job, or even a 5,000 dollar repair job......

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raybond
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Hello Italy

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CashCowMoo
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Whats the point of eliminating this when the money saved from it would just be wasted, unaccounted for, etc. Im sure they could find an insider "green" company through a friend of the white house to pump 500 million into it and watch it go bankrupt.


Close the loopholes already my goodness.

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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