We all hate the oil companies.Is used to cost $20 to fill the 14 gallon tank of my old Firebird. Now, barely five years later, it's pushing $50 to fill the same-sized tank of my new one. Petrol, pushing $4 a gallon, has never been higher and it's not looking like it's going to come down any time soon.
Yet, simultaneously ExxonMobil, the world's largest privately owned oil company, has reported whopping profits of $40 BILLION. High prices? High profits? Surely the two are connected...
Barack Obama certainly thinks so - and he's promising to hit the likes of ExxonMobil with huge 'windfall profit taxes' to redistribute that disgusting profit to the like of the little guy (like me?)
The problem with this plan?
That wealth was already being redistributed to the little guy like me - plus millions of other working and middle class Americans. 98.5% of ExxonMobil stock is owned by institutional investors - much of that on behalf of regular Americans in the form of mutual funds, 401ks and retirement accounts.
I have a 401k - and ExxonMobil's profits help my monthly investment grow - so when I finally retire, I've got enough to live off (because the government has bankrupted Social Security.) So what's the point of investing my hard-earned money if Barack Obama's just going to pluck out the potential profits and give them to somebody else?
It's not just mine, either. It's millions of Americans. In many cases, the same Americans who ignorantly support Obama's cries to tax the oil companies. It's not ExxonMobil who are donating this money for Obama to redistribute - it's regular folks like you and me!
I think people are just too ignorant of the big picture... They don't realise that their relationship to 'big oil' goes beyond their twice weekly fill up (or twice daily if you drive a Hummer.)
Obama - if you want my support, get your grubby mitts [Is that politically correct? Editorial Bear] out of my 401k!
NOTE: As of today, the Republicans decided to do something useful for a change and blocked this proposal before it went anywhere. Nice to see somebody awake in the Senate!
17 comments:
It could be said that the high oil price is a good thing. It is high time for America to learn to use less, and great profits are an opportunity for corporations to invest in new resources. You can't do that without profits. Obama clearly doesn't understand markets.
I agree with anonymous. And you of course :)
You are being penny-wise and pound-foolish. Unless you are rich, the gain on your 401k will be nothing compared with your losses from either an increased tax burden because of policies that shift tax revenue away from super wealthy individuals and corporations to you or much sh*ttier public services.
Two longer points:
1. You're under the delusion that the long term share price is what is desired by those who run corporate America. What these people care about is what all of us care about. Namely, increasing our own wealth. For these titans of industry, this is accomplished by artificially running up the share price in the short-term so the shares can be quickly converted to cash.
This short-term run up often means takking on huge amounts of debt in ways that hurts the share price in the long-term. Look at the recent history of the big banks for an example of how corporate executives destroyed the institutions they ran for huge profits in the short-term. These executives do not work for investors. There currently is nothing on the books to make them work for investors. The governing mechanism is broken.
2. The gain on the 401K of Joe Averageamerican will be nothing compared with the losses that Mr. Averageamerican had to put up with to get these gains.
Now that Wall Street owns the American economy, to a large degree corporate profits grow by feeding off of the lost wages and longer working hours of labor. If this feeding doesn't fill the corporate coffers sufficiently, there's always the global labor arbitrage that allows end runs around hard fought for laws and regulations concerning workplace safety, minimum wages, the environment, restrictions on child and prison labor, etc.
These losses are real and are much greater than the gains most of us will realize in our 401Ks.
Hey PCQ,
Thanks for your comments - if you see my earlier posts, you'll see I'm not a fan of increased taxes for working/middle classes - I think tax relief for them will have a far more beneficial effect on them AND the American economy than giving tax breaks to big companies.
But what Obama's talking about isn't reneging on a tax break - it's taxing 25% more if he deems a company 'makes too much money.'
It's selective additional taxation of a particular industry - remember that the pharma industry make millions in profit, but Obama's not giving that a 25% tax gouge.
It's a political ploy to win support by attacking 'the bad guys' of Big Oil - forgetting that 98.5% of 'big oil' is owned by the public, people like you and I through our 401ks, so the only person he's punishing is us.
Not to mention that a company ALWAYS, WITHOUT FAIL passes the burden of taxation onto the consumer by hiking prices.
I'm a bit reluctant to jump in and comment here... and please know that I am not completely politically literate (if that makes sense... I probably only know just enough to stick my foot in my mouth and show my ignorance)... but I was under the impression that percentage wise our oil/gas is already heavily taxed by the government and that the oil companies profits are just around 8% of what they take in. I can't remember where I heard that and I'm too lazy to go check the facts right now...
I'm pretty simplistic in my thinking but wouldn't regulating oil prices be harmful in the long run? You know, free market and incentive wise.
Okay... I felt bad for being lazy. Here's an article that I found interesting.
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/06/04/no_profits_no_oil/
Check it out.
Pretty darn literate to me, Coffee Bean! I think you're absolutely right.
The federal government makes 20c per gallon - Exxon Mobil make half that. Taxing their profits would make them increase the price, which would reduce volume and the amount of tax revenue it brings in!
Even worse, foriegn oil companies (ExxonMobil is 14th in the world, although all the others are state owned) would be able to swoop in with lower prices because the governments not taxing them.
It's just a dumb, dumb plan. Even I can see that and I'm a liberal-ish person!
It's PQG, Ronald!
My focus was on this:
That wealth was already being redistributed to the little guy like me - plus millions of other working and middle class Americans. 98.5% of ExxonMobil stock is owned by institutional investors - much of that on behalf of regular Americans in the form of mutual funds, 401ks and retirement accounts.
I have a 401k - and ExxonMobil's profits help my monthly investment grow - so when I finally retire, I've got enough to live off
This is the same crock of sh*t that has been used to justify all sorts of wealth transfers to the upper crust of this nation for the past 25 years or so. It's gotta stop!
Since when has it a good idea to place one's future in the hands of Wall Street? They have proven themselves to be a nothing but a bunch of swindlers time after time after time.
What you are doing is pretending that our financial well being is better being nothing but a side effect of enriching a bunch of dishonest casino managers than a function of our hard work. Unless someone is already rich or plans on getting a big windfall when rich Uncle Warbucks croaks, you're writing from Cloud Cuckoo Land.
Not to mention that a company ALWAYS, WITHOUT FAIL passes the burden of taxation onto the consumer by hiking prices.
Can I conclude from the above that you think corporate tax rates should be zero? Then all our stuff would really be dirt cheap!
A tax on profits always gets passed on to the consumer. Simple economic law dictates that the incidence (who pays the tax officially) does not change the the effect the tax has on the overall cost of the good to the consumer. Taxes get filed in the "Costs" section of an accountants notebook. You can say you only tax the profits, but the company simply accounts for this long before the profits come in. A child with a calculator could work it out.
If we need increased taxes for services pqg, then we increase taxes directly on individuals, taxing corporations does little to distribute the burden and is a very roundabout way of getting money for public services.
So yes, we should stop taxing corporations, our stuff would be dirt cheap, but the government would have to increase taxes to make up for the shortfall. The increase however, would essentially be the price difference that we would experience by not taxing the corporations. In other words, the math adds up the same one way or another, and it makes no difference whether you tax the consumer or the corporation.
However a new tax on a corporation is a new tax on the consumer, and the last thing consumers need right now is higher taxes.
In other words, the math adds up the same one way or another, and it makes no difference whether you tax the consumer or the corporation.
I don't buy the one dollar of corporate taxes = one dollar of cost to the consumer relation. The real world doesn't work like that. Prices are not raised and lowered in a vacuum.
That being said, I do agree that you can't tax profits and expect nothing to happen regarding prices. But, as I said before, my beef with the original post was it's claiming that the existence of 401Ks and the like is a sufficent reason to stop any policy that 'hurts' corporate profits.
the last thing consumers need right now is higher taxes.
Which consumers are we talking about? The ones with zero dollars in the bank? You and me? Stan O'Neil? It might be a good thing overall if some 'consumers' pay more taxes than they do today. Perhaps then others -- ones who really can't afford higher taxes -- could then pay less.
PQG - sorry about the name mix. Grrr. i hate it when I get called Ronald.
Let me put it to you simply, though. In what bizarro fantasy world does it make sense to combat high gas prices by taxing the oil companies?
More tax equals more costs equals even higher prices.
I'm not an economist (as you've clearly demonstrated) yet it still seems clear to me that Obama's tax punishment would only hurt us, the average joe, in the long run.
"I don't buy the one dollar of corporate taxes = one dollar of cost to the consumer relation. The real world doesn't work like that."
Uh, yes, actually it does. It's not like the question of whether it's better to do with or without the right to bear arms. In which case it depends on who and how you count things in relative political terms.
Economics is positive, not normative. This is not a political question. It's like gravity: it works whether you agree with it or not.
In the world of money, numbers don't slip into ambiguous cracks. If you so much as drop a dollar on a sidewalk and it gets washed down a gutter it has a clear, measurable, if minuscule, effect on the economy.
If you don't want to believe it, fine. Don't buy into the idea of price indices and compound interest either. See how far you get in a global economy. I'm not stating anything that isn't in every first year college level economics primer:
http://en.wikipedia.org/wiki/Tax_incidence
A tax on oil company profits trickles down to the consumers of oil. It's just another gas tax on the consumer, which is what I mean when I say we don't need more taxes .
If you want to institute higher taxes for the richest part of the population, fine. Do that. Can't make it happen? Taxing the profits of their companies isn't the way to get around it.
Economics is positive, not normative. This is not a political question. It's like gravity: it works whether you agree with it or not.
Which "Economics" are we talking about? There are just so many!
You can pretend economic laws are akin to physical laws but they are not. Economics is not a science whether you want it to be or not. Unlike physics or chemistry, for example, it's predictive value is nil.
Note this doesn't mean it is not a valid discipline. It does mean that we should be wary of people who claim certain economic policies are based on the Laws of God or Nature.
You raise taxes in a certain way and what happens? Depends on a hundred billion billion things. To think that we can have laws akin to Newton's laws for gravity on something like taxation is to mistake some simplified and inaccurate model of reality for a useful model of reality.
The object that economists pretend to analyze is just too complicated to analyze.
A tax on oil company profits trickles down to the consumers of oil. It's just another gas tax on the consumer, which is what I mean when I say we don't need more taxes .
Are you asserting that if a new tax on oil industry profits amounts to $10,000,000 then consumers of that oil industry will pay exactly $10,000,000 more for their product? I find this hard to believe. After all, there are lots of other factors that the tax policy change would influence. Factors that influence the behavior of all players. For example, if the new tax revenues went into alternative energy research.
BTW, I'm not supporting Obama's plan. I just couldn't stand the blanket statements being thrown around here.
If you want to institute higher taxes for the richest part of the population, fine. Do that. Can't make it happen? Taxing the profits of their companies isn't the way to get around it.
You may be right here.
PQG - sorry about the name mix. Grrr. i hate it when I get called Ronald.
I hate it when I get called PCQ or whatever you called me. Actually, I don't really care -- just wanted to bust your balls.
Let me put it to you simply, though. In what bizarro fantasy world does it make sense to combat high gas prices by taxing the oil companies?
Maybe not much. This isn't what I was bitching and moaning about.
More tax equals more costs equals even higher prices.
This may be true of many things. This doesn't mean that all taxes should be driven to zero.
I'm not an economist (as you've clearly demonstrated) yet it still seems clear to me that Obama's tax punishment would only hurt us, the average joe, in the long run.
Be glad you are not an economist. Most of the field are nothing but a bunch of priests serving various powerful interests. Priests who think mathing up their lame models is enough to cow the common folk into believing.
You may be right about Obama's policy sucking.
Just found this blog, & I enjoy it. I have one at www.theyoungrepublican.org, which is a blog the YR's in my area use. Ours is just starting out, though. I need to learn more about "self-promotion" from you Ginger.
But here is something important....aside from 401K's, remember what Bill & Hill proposed in the 90's. A one time "tax" on the equity in your home. Since this is a "profit", to them, and the money is technically available to you via say, a hoem equity line, they figured it as income & proposed this tax but it never really went anywhere. But what do you think will happen to old ideas like this if Obama has a filibuster-proof majority? The messiah will resurrect them.Thank God I just sold my house.
& by the way...I do have a HUmmer (H2), but understood the responsibility when I bought it. I never once complained about filling it, which with conservative driving was only once every 3 weeks or so.
I don't understand why people can't understand this it is economics 101. If you tax a company or a product the customers pay. VERY SIMPLE. If you own a business and the government taxes you do you sell your product for the same amount or raise the price to account for the tax. GEE how difficult is that to understand!!
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