Yesterday, I reported on Citizen for Tax Justice's summary of the various ways that Big Oil has been given excessive tax breaks that could be cut back to help the budget situation. See this post. It's worth noting the report in the New York Times today by Edmund L. Andrews, Incentives on Oil Barely Help U.S., Study Suggests (Dec. 22, 2006). In addition to all those tax subsidies we've been throwing at the wealthy oil companies (immediate deductions for a "percentage depletion", super-accelerated depreciation, treating them as manufacturers entitled to the new lower rate based on the section 199 manufacturing deduction, etc.), we've also been offering them "some of the most lucrative incentives in the world" for drilling in our public waters. Id. The US has "sweetened incentives" in recent years, while other countries have been demanding a larger share of oil company revenue. The US gets about 40% of the revenue from oil and gas produced on federal lands (that's counting royalties and corporate taxes, which are supposed to be paid at a statutory rate of 35% by the big oil companies). But "the worldwide average 'government take' is about 60 to 65 percent." Id. Britain gets 50% from the North Sea companies; Norway gets "from 70 to 78% (based on oil prices).
An Interior Department study (held back for more than a year--were they afraid it would cause even more damage in the mid-term elections?) estimates that these incentives let companies drill in the Gulf and "escape tens of billions of dollars in royalties that they would otherwise pay the government for oil and gas produced in areas that belong to American taxpayers." Id. The Times story notes that in 2004 the Bush "administration offered lucrative new royalty incentives for companies that drill extremely deep natural gas wells in shallow water", in addition to the new tax breaks Congress added.
Now, I can think of a lot of things this government should be doing instead of passing new tax and other breaks for Big Oil (or for any other comfortably wealthy Americans, for that matter). If we're going to talk taxes, how about my 2004 proposal to treat capital gains preferential rate as an AMT preference? That'd raise a good bit of money from those who can afford to pay it,and make up somewhat for the skewing of the tax system in favor of the wealthy over the last 6 years.)
Mr. Bush says he's willing to keep thinking about taxes--but it's the wrong kind of thinking. He's talking about trading support for a minimum wage hike for "small business tax relief." They've already (regrettably, I might add) extended the Section 179 expensing provision to 2009, a favorite of the business lobby to get a huge paper loss deduction up front. Santorum wanted to let more businesses use cash method accounting. Another provision that might be on the table is to change the deduction for meals and entertainment: they don't want to eliminate it (that would be a change I could support) but to increase it. They also want to let small business owners sponsor fringe benefit plans for themselves. The Democrats need to really learn how to say "no". Pass the wage hike, and pass by the business tax cuts.
I can think of many ways to spend those funds that are better than providing a tax break to Big Oil or to business generally. How about cutting the deficit? Or helping the poor in New Orleans hit by Katrina? Or providing a larger earned income tax credit for struggling families? How about more funding for all those government functions tht are being overlooked and neglected right now--from environmental issues to the Forest Service, from the National Parks to the Centers for Disease Control.
Paul Krugman doesn't like the first suggestion. He says that the Democrats should not spend much time right now trying to bring the deficit down. See Democrats and the Deficit, New York Times (Dec 22, 2006). His reason--any resulting move towards a surplus, in this wacky political milieu, just enables right-wing class warfare like George W Bush's "push for greater after-tax inequality" with tax cuts favoring the rich. Id. Better, he says, to just try not to make the deficit worse.
(Right. Again, let's hope the Dems learn to "just say no" to these multiple "extender" packages that just keep coming, like the energizer bunny, digging the deficit (and debt) hole deeper and deeper mostly for the benefit of those already well off.)
Instead, says Krugman, if the Dems succeed in freeing up some money by fixing the Medicare drug program, ending the Iraq war or even rolling back the worst of the Bush tax cuts, they should spend the money well. That way, they can remind Americans of the importance of good government as a benefit to all our lives.
I'm for that. Remember that the wealthiest people in the US could, on their own (with almost no real sacrifice, unless you consider retaining $2 or $3 million a year too little to live on) end the worst of world poverty in a decade. Let's roll back the Bush tax cuts so we tax the most bloated incomes enough to have them pay their fair share for the many benefits of living in a stable market economy. Let's do fix Medicare, and do pull our troops out of Iraq now--not two years, another 2000 American deaths, tens of thousands of Iraqi deaths and another 2 or 3 hundred billion dollars later. Let's use that new tax money and freed up resources to fund universal health insurance and give enough of a demi-grant (through the earned income tax credit and through new programs) to those at the very bottom that they have a chance to participate in the opportunities that abound in this country. Let's use this holiday season, when we are supposed to reflect on the more meaningful aspects of our lives, to start thinking about the lives of others, instead of the crass "greed is good" philosophy that seems to have caught on in the upper income brackets where a good number of CEOs have showered themselves with lucrative backdated options.
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