Posted on 06/27/2011 6:43:15 AM PDT by jda
House Democrats have demanded that a deficit-reduction deal include measures to raise tax revenue but they argue those proposals shouldn’t be viewed as proposed tax increases.
Rep. Jim Clyburn (S.C.), the assistant House Democratic leader and a member of the debt-limit negotiating team, said Sunday that closing tax loopholes are not the same as tax increases.
“The fact of the matter is, we have on the table all kinds of revenue raises that [Republicans] keep calling tax increases. How do you call closing loopholes to oil companies that are making billions of dollars in profits, closing up these loopholes that would generate $40 to $50 billion in revenue, how do you call that a tax hike?” Clyburn said on ABC News’s "This Week".
“That is no tax hike. You only hike taxes when you raise rates,” he argued.
(Excerpt) Read more at thehill.com ...
Doesn't leave him much room for advancement does it.
I believe they are talking about a depletion deduction, which is a tax deduction you are allowed to take because your mineral rights have been depleted. This is a normal business deduction, similar to other business deductions in other industries. The Dems however have a hatred of the oil industry that borders on irrational. They have already succeeded in knocking this deduction down from 27% to the 14% it is now.
How about: mentally ill AND something...
Loopholes? I’m getting tired of the over-use of this term. Tax breaks are fine for the industries they like, but when the same exact tax breaks are used by the oil companies, suddenly they are “loopholes.”
This is one of the significant issues in the negotiation and everyone needs to understand the substance of the argument.
There is only one item I am aware of that affects the "big (major) oil companies who are making billions of dollars" which is the Sec. 199 credit. It is a credit for production activities in the US--originally enacted to incentivize the movie companies to make movies in the US instead of offshore. To get it, the company needs to be paying significant W-2 income to people who work in the US.
I don't think there is a great deal of money at issue on this item--in fact, for the most part, the major oil companies left the Continental US in the 70's with most production activities. Yes, there are exceptions but I don't believe they result in $50bil of tax on the 199 credit.
There are two other items that affect only "small producers" (under the Small Producer Exception). One is the Intangible Drilling Cost deduction (deduct the cost of drilling the well as paid) and Percentage Depletion (write off 15% of gross taxable revenue from the well for depletion of the reservoir). Big oil doesn't get either one of these deductions--only small producers.
And the total tax number at issue on these deductions is less than $4bil in 2011 I believe (my memory of the last CBO report I saw).
As to the IDC and Percentage Depletion--the bottom line is that most Domestic Exploration is conducted by small companies based in the midwest; most of the money comes from people like you and me who can take those deductions.
Point is that Domestic Exploration is not a particularly profitable activity. Much of the production comes from oil wells (strippers) that produce 10-20 bbls a day; or 100 Mcf of gas a day or less. Absent the IDC, these wells don't get drilled; absent the Percentage Depletion, it costs more to produce these wells than they yield and the wells get plugged. Either is bad--the individuals who do the actual work get paid decent wages and those jobs are gone; and we send the money for the energy to entities that produce the energy offshore.
Among the other negative consequences, to get a deduction (write off actual costs of producing the reserves or doing the drilling) you need an expensive engineering report showing how much your reserves are and how much you have produced etc. The Big Oil Companies have a staff that does this stuff; Small Producers do not and cannot afford to have staff to do this. Part of why the activity is not economic without the deductions.
This is the argument that has kept Congress and previous administrations from repealing these deductions.
I am not real clear about the Sec. 199 credit because it seems to me it is like your hypothetical question--it is an actual cost issue which could be added to the cost of domestic oil if it were repealed.
I own the mineral rights to a piece of producing land. I do not own the land. I intend to keep the mineral rights for as long as I live and give it to my children. It has been producing since the 1970’s. When would you say I get my deduction?
tax breaks help move products which are produced and sold with peopel working at jobs.
private jets have to be flowin in the USA, maintained in the usa, stored in the usa, and paid for in the usa.
each tax break removed is another job loss, another foreclosure, another family on the street. IOW good news for democrats.
If ending special tax breaks isn’t raising taxes, then ending higher tax rates that only apply to the rich isn’t giving money to the rich, either.
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