It’s the end of the year, and my business partner and I have to figure out how to reduce our taxes. If we didn’t have to pay so much in taxes, we could hire the four people we need to hire. The government takes so much in taxes from us that it’s getting more difficult to want to work harder. Why bother? But we keep working and trying to figure out how to reduce our taxes. Unfortunately, these reductions don’t lead to further employment. What’s true of our businesses is true of every business, even the biggest of them.
If government had its way, oil prices would be regulated and “excessive” profits taxed. The majority of Americans support higher taxes on the oil companies because of short-term self interest. This is why many of the people who are protesting the healthcare bill are really protesting the possibility that there Medicare benefits will be cut.
The majority of Americans like government subsidies, everything from “free” public education to government subsidized and backed loans, when they benefit from them. They don’t like subsidies for others, and they don’t like corporations making so much money, but they will defend their “right” to get government freebies.
When oil prices spike, usually conservative, anti-welfare Americans scream bloody murder. “Why won’t the government do something . . . The oil companies are making too much money . . . Tax the SOBs.” I read the following article in the New York Times, “Oil Industry Sets a Brisk Pace of New Discoveries”:
The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.
These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose, and of new technologies that allow explorers to drill at greater depths and break tougher rocks.
“That’s the wonderful thing about price signals in a free market—it puts people in a better position to take more exploration risk,” said James T. Hackett, chairman and chief executive of Anadarko Petroleum.
More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.—
The next time you read about “excessive” oil profits, remember where the profits are going. Tens of thousands of investors get some of that profit. They invested in oil companies to make a profit. Many of them are retirees who live on fixed income. No one invests to lose money, unless, of course, it’s the government. The money they initially invested helped the oil companies to buy equipment so they could extract oil from deep deposits. It’s getting more expensive to locate, drill, and transport oil. It doesn’t ooze out of the ground like it used to. Profits insure that there will be oil in the future. If there aren’t “excessive” profits, then there can’t be any research and development.
Years ago, gas pumps used to include a small sign that told consumers how much they were paying in state and federal gasoline taxes. These signs no longer grace our gas pumps. The average tax on a gallon of gasoline is around 45 cents. A CNNMoney article reported that “Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter [of 2008], $9.5 billion in sales taxes, and over $12 billion in what it called ‘other taxes.’” Actually, Exxon didn’t pay a penny in taxes. We consumers paid all of it!
Of course, this is true of all corporate taxation. A tax is considered a business expense. As an expense it’s passed on to consumers, and there is no law that will change this reality. Any company forced to eat the cost of taxation will go out of business or be subsidized by the State. Once again, a subsidy is an extraction of capital from workers, either in taxes paid to the State for the subsidy or by inflation (increasing the money supply). Since a large minority of Americans knows almost nothing about economics, they serve as cheerleaders for “tax the rich” rhetoric and economic policy and vote the Prince Johns into office, all the while blaming poor economic conditions on those under the thumb of the Sheriff of Nottingham.