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Re: oil business and profits

Posted by Dinah on August 20, 2006, at 11:14:57

In reply to Re: oil business and profits » Estella, posted by laima on August 20, 2006, at 7:48:21

I've looked into these "subsidies".

The tax breaks they're talking about is basically allowing the oil companies to deduct the expenses they incur. Which is not exactly a break unique to oil companies. In allowing deduction rather than write off of research and development, I would imagine the government is only acknowledging that these are an ongoing cost of oil exploration rather than a one time start up of inventing and selling widgets. The percentage depletion allowance doesn't cover large oil companies at all. It's limited to those who receive oil royalties of under a certain dollar amount, and is likely put in place to make recordkeeping less cumbersome. You could argue about the percentage, I suppose.

Other "subsidies" include maintaining the roads, and an army. While some might think that the army is maintained purely for the use of the oil companies, that's far from a universal conclusion and I'm not sure that an army should be included as an oil company subsidy. Ditto on roads and highways.

And yes, there are oil tax credits. But those were most certainly not put in place for the benefit of the oil companies so much as to provide incentive for the oil companies to do what the government wishes them to do. Check the names of the tax credits, and they certainly appear to be policy choices. Unconventional fuel source credit?

I'm quite certain other countries allow their companies to deduct expenses they incur, that they maintain roads, and that at least some maintain armies as well.

Moreover, some of the transportation costs are paid by the large taxes on gas. If those taxes are then turned around to build roads, how is that subsidizing the oil company?

Oil is taxed on every level from the time it's pulled out till the time it hits your tank. Severance tax is what, 10-12%? Then the taxes added to the actual tank of gas, and myriad taxes in between on the supplies used to process gasoline, property taxes on the real estate and personal property used to process and distribute gasoline.

I don't get the claim of subsidies.

I'd prefer that the cost of taxes per gallon be displayed right below the cost per gallon on each and every pump.

 

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