If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(Think Progress)   Happy 100th birthday, Big Oil tax breaks   (thinkprogress.org) divider line 6
    More: Fail, tax breaks, celebrations  
•       •       •

4108 clicks; posted to Main » on 02 Mar 2013 at 7:37 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



Voting Results (Smartest)
View Voting Results: Smartest and Funniest


Archived thread
2013-03-02 11:00:05 PM  
2 votes:

cirby: "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."

In other words, the oil companies get the same sort of tax breaks that every other business, corporation, or person running a business gets. That's... completely unimpressive. The only people who think it's unusual are the ones who have never filled out a Schedule C for taxes...



The idea that oil and gas companies get the same tax breaks as everyone else is not only false, it's laughably so.  Here are some of the sweet deals that oil and gas companies get here in the US.  Some of these are specific to the oil and gas industry, and some are extended to the oil and gas industry even though they shouldn't qualify.

Percentage depletion
Companies are generally allowed to deduct the costs of an investment over the life span of that investment. As the value of the investment depreciates, the deduction goes down. Oil companies on the other hand, get to use a special method for deductions for their gas and oil wells called "percentage depletion." Instead of deducting the costs of a well as its value declines, oil companies can deduct a flat percentage of the income they derive from it. Thus a well's tax benefits do not depreciate over time, and the more profitable a well, the greater the tax benefit. No other industry is allowed to do this.

Domestic manufacturing deduction
Manufacturing companies were extended special deductions starting in 2004 for keeping manufacturing jobs in the US. The gas & oil companies managed to lobby enough to get included in these special deductions, even though they can't outsource most of their business since it depends on geographically fixed resources.  So, they're getting deductions for keeps jobs in the US that they couldn't move outside the US even if they wanted to.

Immediate deductions for drilling costs
Whereas companies in every other industry have to spread their deductions for investments over the life of the investment, oil & gas companies can take immediate full deductions for some expenses involved in the building of oil and gas wells. No other industry is allowed to do this.

"Dual capacity taxpayer" rules
We allow companies that do business internationally to take deductions from their US tax bill for the taxes they've paid to other governments. Oil companies get "dual capacity taxpayer" status, which allows them to claim tax reductions on royalty payments (which are not taxes) to other countries in addition to the deductions for taxes paid.

But yeah, those poor oil and gas companies are just like everyone else and just get a bad rap.
2013-03-03 12:55:49 PM  
1 votes:

relcec: Domestic manufacturing deduction
Manufacturing companies were extended special deductions starting in 2004 for keeping manufacturing jobs in the US. The gas & oil companies managed to lobby enough to get included in these special deductions, even though they can't outsource most of their business since it depends on geographically fixed resources. So, they're getting deductions for keeps jobs in the US that they couldn't move outside the US even if they wanted to.
this applies to all manufacturing companies.



News Flash: Oil and gas companies aren't manufacturing companies, they're extraction companies.  As extraction companies, they shouldn't qualify for a benefit that was extended to manufacturing companies.


relcec: Percentage depletion
Companies are generally allowed to deduct the costs of an investment over the life span of that investment. As the value of the investment depreciates, the deduction goes down. Oil companies on the other hand, get to use a special method for deductions for their gas and oil wells called "percentage depletion." Instead of deducting the costs of a well as its value declines, oil companies can deduct a flat percentage of the income they derive from it. Thus a well's tax benefits do not depreciate over time, and the more profitable a well, the greater the tax benefit. No other industry is allowed to do this.

this is simply treated as depreciating asset and it applies to every single resource extraction company in existence. it's the same principle that allows a landscape service company to depreciate the value of a  work truck as its service life expires, it is the same principle that allows intel to depreciate their chip fab plant in chandler arizona as its working life expires, or that allows your local power and gas to depreciate a wind turbine as its serivce life expires.



Reading comprehension, how does it work?  Did you miss the part where there is no depreciation?  The tax break is tied to income from a well and only goes down if income goes down.  Even wells reaching the end of their operational life are capable of full production, so for most wells the deduction stays pretty much the same for its entire life.


relcec: Immediate deductions for drilling costs
Whereas companies in every other industry have to spread their deductions for investments over the life of the investment, oil & gas companies can take immediate full deductions for some expenses involved in the building of oil and gas wells. No other industry is allowed to do this.
just like you can take a deduction for the ordinary costs like labor or rent of any business immediately during that tax year.
you want to tax companies on total revenue instead of profit or something? there is no other way to do it.



Oil and gas companies can take immediate full deductions on equipment as well.  Once again, since you seem to have trouble with English;  No other industry is allowed to do this.


relcec: "Dual capacity taxpayer" rules
We allow companies that do business internationally to take deductions from their US tax bill for the taxes they've paid to other governments. Oil companies get "dual capacity taxpayer" status, which allows them to claim tax reductions on royalty payments (which are not taxes) to other countries in addition to the deductions for taxes paid.
every company that does business oversees avails themselves of this feature. and of course royalty payments are taxes when they accrue to a government.



No, royalty payments are royalty payments.  That would be why they're called "royalty payments."  Payments don't magically become "taxes" just because you're giving them to a government.  Regardless, per the US Chamber of Commerce, almost all dual capacity taxpayers are oil and gas companies.  Once again, a tax benefit extended to oil & gas that other industries don't get.


So, I can't decide whether you just really love oil and gas companies, or you have trouble understanding English.  Oh, and to stave off the inevitable rant about what oil & gas have done for us, I know.  We wouldn't be the country we are without them, but we need to stop giving them benefits no one else gets or that they shouldn't be getting.  They're one of the most profitable industries on the f*cking planet, partly because they get those benefits, and they're not going to go out of business (or even take that much of a hit to their profits) if we start making them play by the same rules that everybody else plays by.
2013-03-02 11:16:21 PM  
1 votes:

CujoQuarrel: You do realize that they would just raises prices don't you?


Actually prices are dependent on the futures market, specifically the oil futures market. Interestingly enough it's oil companies driving up the prices there. A barrel of oil on the futures market shouldn't cost what it costs now if the price actually had anything to do with supply and demand and perceived availability. As it is, oil companies have gladly helped jack the price up cause it fattens their profits. Though there's way to take care of the futures market issue.
2013-03-02 08:41:26 PM  
1 votes:
CujoQuarrel:

You do realize that they would just raises prices don't you?

Yeah, Because subsidies have been the one thing holding them back from rasing prices all this time.

It's kinda like hearing people biatch about "Obamacare kicked in, and my health care premiums just went up!"

Well, yeah, and can you name a year when they didn't?

Get used to it, folks... You will not see our absurdly subsidied gasoline at less than $2 / gallon ever again.
2013-03-02 08:33:41 PM  
1 votes:

CujoQuarrel: You do realize that they would just raises prices don't you?


... which is just fine, as those *using* a resource should be the ones *paying*.
2013-03-02 06:02:36 PM  
1 votes:
And we've come...absolutely nowhere since Teapot Dome.  Well, we were getting somewhere, but thanks to deregulation, nothing has really changed.
 
Displayed 6 of 6 comments

View Voting Results: Smartest and Funniest


This thread is archived, and closed to new comments.

Continue Farking
Submit a Link »






Report