larryselbows
Banned
lol, how much time did you spend researching so that you could say "I TOLD YOU SO!!" on Jazzfanz?
Energy Independence a Reality?
- Thread starter candrew
- Start date
lol, how much time did you spend researching so that you could say "I TOLD YOU SO!!" on Jazzfanz?
That's a wide blanket you're casting so I looked into this a little more. $1bln of the $3.6bln in that report (not $3.06 that wiki says) is "available only to independent producers who produce fewer than 1,000 barrels per day and any related royalty owners; the deduction is 15 percent of gross income for oil, gas and oil shale."
That's an expense deduction and not a subsidy, and goes to very small producers who aren't likely to be wildly profitable like the major integrated companies are.
Another $1.1bln:
Again, this isn't a subsidy but typical expensing. The question is at what rate these companies amortize their deduction, with those in favor of higher taxation claiming the expensing is happening at an accelerated rate (pushing tax liability a couple years down the road).
This is a subsidy, and at minimum should definitely go away after oil reaches a specific price/bbl. However, we have to realize that if this credit is leading to higher domestic production then we aren't actually paying the entire $890mm as we import less oil and create US jobs that pay it back in income taxes, etc.
One tax break I think should go away is the foreign tax deduction. They used to be royalties until the Saudi's cuddled up to the US firms and changed royalties to taxes so these companies could get a deduction here that our other multi-nationals don't enjoy.
Doesn't look true:
https://www.instituteforenergyresea...ubsidies-for-renewables-increase-186-percent/
Not to mention the billions in state and municipality subsidies in addition to the federal ones.
It was the second link on Google.
Are you saying it's a good thing to subsidize small business owners when they are less profitable?
Removed in an edit. The source is the comptroller's report, linked below. Notice that very report has a separate section for this $1.1 billion versus the $35 billion it describes as available to any corporation. It's inaccurate to say this is typical expensing, when the source makes it clear this is not.
What, 0.8 doesn't look like less than 5.0, or are you saying those subsidies you mentioned weren't built into that 5.0? Did you just misread me?
More on the comtroller's report:
https://www.window.state.tx.us/specialrpt/energy/subsidies/
Maybe this is a misstatement, I don't know. However, my understanding is that normally you make deductions from revenue, not from the tax. Would you agree deduction from the tax instead from revenue affords more value (basically, this would be the same as a tax credit, right), in effect giving something not available to any general business expense?
franklin said:
I've bolded the answer to your question which was contained within the quote you were questioning.
As far as taxes go, I fully support tailoring our tax code to match the activity in question. Strip wells provide a large part of our energy output (I read 25% earlier today but don't remember where) and create hundreds of thousands of high paying jobs. If accelerated expensing is required for all these jobs to get created then so be it. If you want to challenge the need for accelerated expensing in this scenario then make your case and let's vote on it.
Sorry for not being clear. All my quotes except the last one that included a link were from this report. You didn't question the $35bln special accelerated expensing that was stated as a deduction (not subsidy) available to all industries so I didn't mention it. Someone estimated in 1996 that 13% of the deduction possibly went to the oil industry but this could not be verified. Is there a reason you don't think this standard expensing should be included in GAAP? I have no problems getting rid of it for all if it doesn't make sense. I do find it ludicrous to target oil real estate only, but would be open to something like a manufacturing targeted acceleration if it could be shown as a net benefit to the country.
I suppose we would have to decide on what a subsidy is first and add them all up. The solar credits are no doubt a direct subsidy. I don't know how the windmill tax stuff works.
I'm unsure. Further on it says "The credit enables oil and gas producers to immediately write off as an expense these costs from income taxes rather than amortize them (spread the deductions out) over the productive life of the property.", which makes it sound like it they would expense it from net income (or deduct from revenue). I can read this either way. Your way and it is a subsidy that should be changed to a proper writeoff, IMO. No argument from me there.
Perhaps this is my naivte, but what sorts of industries are prevented from using accelerated expensing? If you buy a $2 million machine today, there's a law making it illegal to claim that entire amount against your net income this year? I can understand that if you choose spread out the costs of the purchase over several years, there might be limitations on that structure, but what you are suggesting seems bizarre.
I'm out of my depth here, though.
It's depreciation. When a company buys an asset they write off the cost in proportion to its value decline. The depreciation rate is dependent on longetivity. I've heard real estate is depreciated on a 50 year schedule. Conversely, the Obama stimulus bill allowed companies to depreciate large truck purchases in 1 or 2 years. I don't know mining tax accounting at all, but there's an issue of hitting a gusher and placing, say, a $4,000,000,000 asset on the books in advance of realizing any gain (from sale or operations) but have only invested $400,000. In theory, that $4,000,000,000 could be taxed even though the well has not produced enough cash to even pay the tax bill. This, of course, would create an environment where the largest producers could feed off the hard work of small operators as they're required to fire sale just to pay the taxes. So we allow these small strip well operators to write off everything now and pay a much higher tax the following years as the oil is pumped out but the intangible expense deduction is already used up (or carried forward if expenses are in excess of gains in the first year).
Maybe nightmare39xx can come in here and explain this better.
I would have thought assets might be subject to property taxes, or more likely capital gains taxes upon sale, but income taxes?
Again, in my naive understanding: this small prospector spends, say $300K/year on creating wells. This year he manages to hit the $4M (asset-value) gusher, which pumped out oil sold for (after pumping expenses) $200K. Are you saying that in any other industry, he gets taxed for making a $3.9M profit, instead of writing off a $100K loss, but since this is oil, that doesn't happen? It would seem to me the real problem is that other industries do get taxed that way. If as an individual, I patent a product, and that patent has an estimated value of $30K, I don't start paying taxes until I start selling rights or I sell the patent outright, to my understanding.
If I pay $1,000,000 for a piece of real estate and run a bakery out of the bottom that brings in $100,000 per year, I cannot write off $100,000 of the $1,000,000 investment the first year. I would have lost money on paper but have to pay taxes because I didn't lose any money in reality as the asset is still likely worth $1,000,000.
Conversely, if I buy a bunch of computers to fill a leased building for a call center, I can depreciate the electronics on a 5 year schedule because their value is expected to be reducted proportionally. I can also write off the entire leasing expense as it I didn't realize an asset from this cost.
Appreciation can go into the income statement and get taxed. There are different methods of accounting that companies can adopt and some investments will get taxed while others won't. Mining accounting is different from what I gather as there are specific issues that we need to tailor the tax code to. We make special laws for every industry and have all that GAAP and FASB crap...
Conversely, if I buy a bunch of computers to fill a leased building for a call center, I can depreciate the electronics on a 5 year schedule because their value is expected to be reducted proportionally. I can also write off the entire leasing expense as it I didn't realize an asset from this cost.
Appreciation can go into the income statement and get taxed. There are different methods of accounting that companies can adopt and some investments will get taxed while others won't. Mining accounting is different from what I gather as there are specific issues that we need to tailor the tax code to. We make special laws for every industry and have all that GAAP and FASB crap...