Big Oil vs Congress

[brian0918]

A year ago, had I heard this story on NPR, I would have been cheering for the politicians grilling those GREEDY OIL TYCOONS.

I hear this story on the radio today, and the politicians sound like nothing less than MONSTERS!

It got me wondering, how did this huge divide in my understanding come about?

A year ago, I would have thought Ed Markey (D-Mass) had a point when he asks "Why is Exxon Mobil resisting the renewable revolution?" Now he just doesn't make any sense. If Exxon refuses to invest in renewables, Exxon is doing what it pleases with the money that consumers agreed to give to Exxon. If that means fewer consumers choose Exxon (over the other choices), then Exxon will want to innovate to catch up to the competition.

The worst quote was from a woman on the committee, I can't find the audio, but she effectively said, "if Exxon Mobil doesn't give more to renewable innovation, we are going to take away their tax breaks", which to me was simply a way of saying "if you don't give up your money, we are going to take it by force."

Why don't most people make this connection? What connections were I missing a year ago?

Edited April 1, 2008 by brian0918

[softwareNerd]

Why don't most people make this connection? What connections were I missing a year ago?

That you aren't your brother's keeper? That Exxon isn't either? That government is not in place to see that Exxon is selfish, but not too much?

[TheEgoist]

Well, what's the excuse for giving major corporations like this subsidies, or any business for that matter? I think there is certainly an injustice there, but then I don't support subsidies for anything...

[softwareNerd]

Well, what's the excuse for giving major corporations like this subsidies, or any business for that matter? I think there is certainly an injustice there, but then I don't support subsidies for anything...

What subsidies?

[TheEgoist]

Near the end of the article it says that these companies are receiving billions in subsidies. I'm currently trying to find something about it via google search and can't,however.

[softwareNerd]

They may be getting subsidies, I just don;t know, and do not trust the characterization. My guess is that these are so-called tax-breaks. See here.

[brian0918]

I saw that as well and was wondering what they were referring to. If the government is in fact giving them money, then they should stop. If it is simply tax breaks (which is my guess, since the rest of the discussion was about taking away tax breaks) then that company should consider itself lucky while it has the tax breaks.

[themadkat]

I saw that as well and was wondering what they were referring to. If the government is in fact giving them money, then they should stop. If it is simply tax breaks (which is my guess, since the rest of the discussion was about taking away tax breaks) then that company should consider itself lucky while it has the tax breaks.

The only problem with giving tax breaks to big corporations, as opposed to giving tax breaks to everyone, is that it is an anticompetitive practice (big surprise there). If these megacorps are cutting special deals with the government that would not be available to newer players, or even certain other major players, this is a bad thing. It's more or less the aristocracy of pull. I'm not saying that's what's going on here. I'm just pointing out that tax breaks are not as clear-cut beneficial as some make it sound. In fact, it may be tougher to tell the difference between a tax cut and a clear-cut subsidy than you think (for example, what would a tax rebate be?). I'm all for tax breaks, but only if EVERYONE gets them. Unfortunately I don't think government plans on doing that any time soon.

[softwareNerd]

I'm all for tax breaks, but only if EVERYONE gets them.

Individuals get lots of "tax-breaks". When you file your taxes, you must get at least the so-called "standard deduction" and the standard per-person "exemption". When your company buys you health-insurance, this is like your income, but the government gives you a tax-break on that money. The same for money you place into certain types of accounts (like 401(k)s or IRAs). All these are "tax-breaks" in the same sense that businesses get "tax-breaks".

I think the problem is in trying to define what one means by a "tax-break". I'm not sure it is possible to come up with something meaningful.

[KendallJ]

From Today's Wall Street Journal Editorial page on the testimony, emphasis mine.

Mr. Markey also used the occasion to threaten special tax increases, grilling the executives about $18 billion in "subsidies," which are actually a tax deduction that Congress itself extended to all manufacturers, including Big Oil.

[brian0918]

I believe the "subsidies" are in fact simply tax breaks. At the beginning of Mackey's "April Fool's" statement, he calls them "tax subsidies", ie tax breaks.

[brian0918]

The only problem with giving tax breaks to big corporations, as opposed to giving tax breaks to everyone, is that it is an anticompetitive practice (big surprise there). If these megacorps are cutting special deals with the government that would not be available to newer players, or even certain other major players, this is a bad thing. It's more or less the aristocracy of pull. I'm not saying that's what's going on here. I'm just pointing out that tax breaks are not as clear-cut beneficial as some make it sound. In fact, it may be tougher to tell the difference between a tax cut and a clear-cut subsidy than you think (for example, what would a tax rebate be?). I'm all for tax breaks, but only if EVERYONE gets them. Unfortunately I don't think government plans on doing that any time soon.

The problem with your analysis is that you are assuming that the issue lies with companies "cutting special deals" with the government. The issue is that it is possible at all for anyone, including companies, to be able to "cut deals" with the government. There has to be something wrong with the system if my uncle is a member of Congress and I can ask him to have the government write me a check to recover some of my taxes that the government took in the first place. I shouldn't be able to do that. How is anyone able to do that? Because the government is interfering in the system. By taxing everyone, and then granting only "tax breaks" to friends or pet projects that get them votes, the government is creating an anticompetitive situation where there was none previously.

So what solutions are there? One might suggest getting rid of tax breaks altogether. But then the government would use selective "tax increases" as the form of manipulation. One might then suggest restricting taxes to a flat rate for everyone, preventing increases or decreases for select groups. But would this be any better? Would they not still find some means of manipulation?

It seems like we are shooting around in the dark at a nebulous enemy. The government, acting as the "supply", is able to fulfill the "demands" of friends and supporters, through manipulation of the economy. Trying to cut off the demand will not work because the supply will still exist and people will always find a way for that demand to be fulfilled. We need to remove the supply altogether - ie, separate the government from the economy.

What we need are principles in which to ground our reasoning. The basic principle to be used here is the right to property - that no one should be able to take another person's property unless they have agreed freely upon the transaction, with no use of force. Taxation in its current state is a use of force and is thus a violation of that right. Remember that even though people can vote for legislation that violates rights, those rights do not just disappear.

The moral solution is an end to forced taxation altogether, replacing it with voluntary taxation. You can think of these as simply donations, but they are more like voluntary insurance payments, considering the intended role of the government to uphold and protect the rights of its citizens. Given the current reality, this solution is more of a long-term goal, and any progress that is made in that direction is a plus.

Edited April 2, 2008 by brian0918

[KendallJ]

I believe the "subsidies" are in fact simply tax breaks. At the beginning of Mackey's "April Fool's" statement, he calls them "tax subsidies", ie tax breaks.

Ah, the difference is spin my friend. If you're a politician pitching them, they are tax breaks for the beleaguered industries. When you want to beat up the companies you gave them to because they are making "too much" profit, then they are subsidies.

[brian0918]

Ah, the difference is spin my friend. If you're a politician pitching them, they are tax breaks for the beleaguered industries. When you want to beat up the companies you gave them to because they are making "too much" profit, then they are subsidies.

Were I in that position and they asked, "Why should we grant you these subsidies?" I'd say, "Good question... why should you want to take that gun out of my face?"

Edited April 2, 2008 by brian0918

[brian0918]

I found the audio story from NPR. It's only 3 minutes. The choice quote is at the end, from Candice Miller (R-Mich):

If you refuse to change with America, then I believe you're going to see a backlash from your customers, the American people, who are sick and tired of paying huge prices at the pump only to see your companies swimming in their money. Because of that you will see a backlash from this Congress that could go further than just the elimination of tax breaks you currently enjoy, which are becoming increasingly difficult to justify.

This was the statement that I found particularly monstrous.

Edited April 2, 2008 by brian0918

[Thales]

I found the audio story from NPR. It's only 3 minutes. The choice quote is at the end, from Candice Miller (R-Mich):

This was the statement that I found particularly monstrous.

Particularly monstrous when you realize that the real price gougers and takers are Congress. We need to haul them up before "Big Oil". And notice how it's a republican, big surprise there.

[JASKN]

I found the audio story from NPR.

ARGGHH!!

Why does anyone have to defend life profits to anyone else, especially a government? I wonder if a basic string of logic such as, "Man worked, made life better through mutual agreement (not at the expense of someone else), and owns and is not required to justify profit," would cause the that old beurocrat hag some pause. Probably not, though I find it hard to imagine how.

[Maximus]

She wouldn't get it. Your money is thier's, in thier strange world. Besides, they are posturing for the camera, so they can trot out a sound-byte next election and say: "Look, I'm a defender of the common man!"

[themadkat]

Individuals get lots of "tax-breaks". When you file your taxes, you must get at least the so-called "standard deduction" and the standard per-person "exemption". When your company buys you health-insurance, this is like your income, but the government gives you a tax-break on that money. The same for money you place into certain types of accounts (like 401(k)s or IRAs). All these are "tax-breaks" in the same sense that businesses get "tax-breaks".

I think the problem is in trying to define what one means by a "tax-break". I'm not sure it is possible to come up with something meaningful.

I am aware of this. I prepare and file my own taxes. The government subsidizes the fact that I have borrowed money, for instance, because I can write off my interest. I do not think anybody should be getting tax breaks because I find it more than a bit silly that the government is encouraging me to take certain courses of action that I would not otherwise, in order to shelter my money from certain taxes. If I wanted to do those things, I would, I do not require an extra incentive beyond that. I would much rather the government just not charge me, nor anyone else, that amount. I recognize that the best solution is to eliminate forced taxation all together, but as I really don't ever see that happening in my lifetime, I would much prefer a low flat tax that everyone pays regardless of circumstance, maybe 10%. I'm kind of taken aback by the ridiculous tax burden that I currently face, probably upwards of 40% of my income, even though I fall into a range most people would consider lower middle class.

[themadkat]

The problem with your analysis is that you are assuming that the issue lies with companies "cutting special deals" with the government. The issue is that it is possible at all for anyone, including companies, to be able to "cut deals" with the government. There has to be something wrong with the system if my uncle is a member of Congress and I can ask him to have the government write me a check to recover some of my taxes that the government took in the first place. I shouldn't be able to do that. How is anyone able to do that? Because the government is interfering in the system. By taxing everyone, and then granting only "tax breaks" to friends or pet projects that get them votes, the government is creating an anticompetitive situation where there was none previously.

So what solutions are there? One might suggest getting rid of tax breaks altogether. But then the government would use selective "tax increases" as the form of manipulation. One might then suggest restricting taxes to a flat rate for everyone, preventing increases or decreases for select groups. But would this be any better? Would they not still find some means of manipulation?

It seems like we are shooting around in the dark at a nebulous enemy. The government, acting as the "supply", is able to fulfill the "demands" of friends and supporters, through manipulation of the economy. Trying to cut off the demand will not work because the supply will still exist and people will always find a way for that demand to be fulfilled. We need to remove the supply altogether - ie, separate the government from the economy.

What we need are principles in which to ground our reasoning. The basic principle to be used here is the right to property - that no one should be able to take another person's property unless they have agreed freely upon the transaction, with no use of force. Taxation in its current state is a use of force and is thus a violation of that right. Remember that even though people can vote for legislation that violates rights, those rights do not just disappear.

The moral solution is an end to forced taxation altogether, replacing it with voluntary taxation. You can think of these as simply donations, but they are more like voluntary insurance payments, considering the intended role of the government to uphold and protect the rights of its citizens. Given the current reality, this solution is more of a long-term goal, and any progress that is made in that direction is a plus.

Yeah, I get that. Pull is bad. Anyone can see that. But unfortunately the entire power structure of American politics is pretty much based on pull and patronage. It's almost like some kind of perverse protection racket. I don't see it going away in our lifetime, but hopefully perhaps we can beat it back a little. The point I was trying to make is that as we change things for the better, we have to make sure not to just remove the influence from some areas but leave it in others and call it good, because that still leaves some people at a competitive disadvantage for reasons that are wholly arbitrary. In other words, if you're going to reduce the tax burden on, say, tech companies, you can't just eliminate Microsoft's taxes only, you need to cut taxes on Apple, Google, Dell, etc. at the same time, or you're hamstringing those companies for no reason at all, except perhaps that they didn't have as much lobbying power as Microsoft.

[DragonMaci]

I'm kind of taken aback by the ridiculous tax burden that I currently face, probably upwards of 40% of my income, even though I fall into a range most people would consider lower middle class.

Be glad your are not in NZ then. Your tax rate would be higher here. Once you include income tax, local government rates, and ACC levies your tax rate here would be nearly 50%. In fact if you are a student you would be paying more than 50% once student loan repayments are factored in. And neither of those factor is New Zealand's sales tax, GST, which is 12.5% of the price of goods and services. It also doesn't figure in things like petrol, alcohol, and tobacco excise taxes, and many other taxes. The government taxes about 40% of NZ's GDP.

Edited April 3, 2008 by DragonMaci

[softwareNerd]

I am aware of this. I prepare and file my own taxes. The government subsidizes the fact that I have borrowed money, for instance, because I can write off my interest.

Fair enough. I don't like the current complexity either, so I think we're on the same page. The point I was trying to make is this: tax-breaks that oil-companies get are no different from the tax-breaks that individuals get. Therefore, voters are not justified in getting upset as if oil-companies are being treated differently from themselves.

I'm kind of taken aback by the ridiculous tax burden that I currently face, probably upwards of 40% of my income, even though I fall into a range most people would consider lower middle class.

I just did my taxes and couldn't agree more.

[Steve D'Ippolito]

I am about to get raped on mine too.

Too much government doing too many things government shouldn't do.

[adrock3215]

I'm kind of taken aback by the ridiculous tax burden that I currently face, probably upwards of 40% of my income, even though I fall into a range most people would consider lower middle class.

40% is absurd. You need to do something about that immediately by taking advantage of various tax breaks and loopholes. There is no reason you should be paying this high a percentage, at any income level. The only excuse is that you are inefficient or not properly educated in managing finances.

[brian0918]

Yeah, I get that. Pull is bad. Anyone can see that. But unfortunately the entire power structure of American politics is pretty much based on pull and patronage. It's almost like some kind of perverse protection racket. I don't see it going away in our lifetime, but hopefully perhaps we can beat it back a little. The point I was trying to make is that as we change things for the better, we have to make sure not to just remove the influence from some areas but leave it in others and call it good, because that still leaves some people at a competitive disadvantage for reasons that are wholly arbitrary. In other words, if you're going to reduce the tax burden on, say, tech companies, you can't just eliminate Microsoft's taxes only, you need to cut taxes on Apple, Google, Dell, etc. at the same time, or you're hamstringing those companies for no reason at all, except perhaps that they didn't have as much lobbying power as Microsoft.

If your argument is simply that we should tax everyone equally until we are able to get rid of the abomination (forced taxation) altogether, to avoid any influence on the economy, I think there are two unsurmountable problems:

1. How to calculate what this equal tax should be. Nobody is ever going to agree on this.

2. As long as politicians are permitted to interfere in the economy, they will find a way to manipulate it in exchange for bought votes. "Equal taxation", will not stop them from manipulating the economy.

Edited April 3, 2008 by brian0918