Daniel Foster posted this on the Corner on National Review.
Greg Sargent has a set of Democratic talking points reportedly being circulated to Obama allies and “TV surrogates” by the White House, a sign the administration is beginning to feel the heat on the issue.
The talking points boil down to raising taxes on oil companies. The taxes will increase the cost of doing business. How is raising their costs going to lower the prices at the pump? They don’t explain.
- Although there is no single, easy answer for addressing increased gas prices in the short term, there are things we can do to guarantee that Americans aren’t victims of escalating gas prices in the long term.
- One thing we can do is eliminate unnecessary tax breaks for the oil and gas industry and instead invest that money into clean energy, so that we can cut our dependence on foreign oil.
- America’s outmoded tax laws offer the oil and gas industry more than $4 billion in annual taxpayer subsidies, even though that industry is expected to report extra-large profits this quarter. Even as those companies are reaping near record profits, Americans are shelling out for near record gas prices. That doesn’t make sense and it has to end.
Obama’s plan, as outlined in his 2012 budget request, would raise taxes on oil companies by as much as $90 billion. (Please note that that is a study produced by the American Petroleum Institute, not an especially unbiased source, but a good place to start.)
When I studied economics in kindergarten, I learned that when you raise the cost of something the price goes up. It’s almost as if he wants the cost of energy to necessarily skyrocket or something.
How does Obama intend to increase taxes on oil companies? Let me count the ways:
- Eliminate the ability of oil companies to expense the cost of exploration. Today, they get to write off the costs of exploration as the costs are incurred, instead of depreciating the costs over the life of the asset.
- Eliminate the ability of oil companies to deduct the income taxes they pay in foreign countries for operations there.
- Strip from oil companies (and only oil companies), the ability to participate in what are called Section 199, which accelerates deductions for employment dedicated to production.
- Eliminate the LIFO accounting practice. This is an accounting technique, required of all companies by the SEC, wherein they value inventory at the price of the last barrel purchased. This has the effect of increasing their accounting cost as prices are rising, since they now carry the current cost, rather than the cost when acquired.
I’m no expert on oil or accounting, but when an entire party has one industry in its cross hairs, someone is going to get rolled. This is pure demonization going on, and it won’t end well.