What we are talking about are not subsidies but every day tax deductions for operating cost that every business large or small are entitled to.

What this bill does is change the way these deductions are expenced.
They are taking everyday operating expenses and expencing them as a capital investment. In the long run the tax revenue will be very much the same. There will be a increase in tax revenue in the beginning but 15 years down the road there will be less.

Section 199 also allows you to recoup some of the capital outlay that you incurred by expanding or improving your business. To treat this as capital investment will spread the cost over 20, 30 or even 40 years.

An example. Obama announced that they are going to expand domestic oil production. The only place you can really do that at this time is off shore. This requires hundreds of millions of dollars invested in oil platforms.
This is a capitol investment depreciated over 30 or more years. Section 199 allows you to wirte off a percentage of that cost in the first year allowing you to recoup some of the cost at a time when you most need it.
This is an incentive to produce more domestic oil which is what Obama and just about everybody else wants. This bill strips section 199 form the equation. It is counter productive to their stated claims.

You inhibit domestic oil production.
You decrease shareholder dividends, that's you and me.
You increase taxes to pay off the deficit but they are already spending that money someplace else.

This bill is a lose, lose, lose situation pure and simple.

Again corporations DO NOT PAY TAXES, the consumers do, not the taxpayers but everybody that uses gas weather or not they pay taxes.

Many of these so called loop holes are there for a reason. Some of the reasons are very dubious at best. It certainly wouldn't hurt to take a good a look at all of them, but this one really serves it's purpose.

Magic

Tax tax tax, that's all I hear, how about cutting the insane spending or the growth of government, I got a sure fire solution too all of this, you raise taxes say 5 percent on every one, you cut spending and slash the size of government by 15 percent for a start, and every year you cut the size of government by 5 percent.

Exactly, Subsidies are a good then when used properly and responsibly, they can prop up industries that are in a bad cycle. This however is not a time for subsides for oil companies...theres just not a good reason for taxpayer money to go to them, wither or not they have stockholders or not. Other companies have people holding stock...but do they get this treatment?


So you're saying that we should all have to pay for these oil companies expansions because it will cost them a pretty penny and your dividends will shrink? hrm...so its bad to pay for your healthcare...but i have to grow your 401K?

also, these aren't "Mom And Pops Oil Shop" These are the big boys in the industry, the ones who can already afford to expand and do more drilling. They Want new places to drill, it's not like we coax them into that. Also, lets think of what happens when we let them write off their expansion plans...they get to double Dip. Not only do they get to "recoup some of the capital outlay" at the people's expense, they get to keep all the profits they get from the increased production of oil.

"Exactly, Subsidies are a good then when used properly and responsibly, they can prop up industries that are in a bad cycle. This however is not a time for subsides for oil companies...theres just not a good reason for taxpayer money to go to them, wither or not they have stockholders or not. Other companies have people holding stock...but do they get this treatment?"

Yes they most certainly do get this exact treatment.
What this bill addresses are not subsidies but deductions for everyday business expenses. Every company gets these exact deductions in exactly the same way. With the exception of the Depletion Allowance and I do think that needs to be looked at again even though it may cost me personalty some money. The Depletion Allowance has gone far beyond being a incentive for domestic production and looks very much like a subsidy. The percentage needs to be reduced or eliminated and just use actual cost basis.

There is no taxpayer money going to them.
If they don't spend any money on new domestic development than they get exactly nothing. If they spend the money they are entitled to deduct it and they will, every penny, only thing this bill does is change the time over which it will be deducted. Section 199 lets them deduct more expense in the first one to five years. That's when you need the deduction most as you just put out one he** of a lot of cash.

Capital investment means the same amount will be deducted evenly over 30 or 40 years. The government will not really get any more taxes in the long run, but it will cost the oil companies quite a bit more to produce more domestic oil. I'm sure that you understand this concept. Capital outlay, loan amortization, negative cash flow, compound interest, etc.



"So you're saying that we should all have to pay for these oil companies expansions because it will cost them a pretty penny and your dividends will shrink? hrm...so its bad to pay for your healthcare...but i have to grow your 401K?"

Absolutely not!
First when you say "we are all paying..." I assure you that with or without this bill you will be paying for expansion and everything these companies do including the taxes they pay. But the "WE" are not the taxpayers as you infer. Everybody that buys gas or oil or anything else they make will pay for everything. Higher taxes = higher gas prices.

Taxes are a cost of doing business and are figured in when you set the price of your produce no matter what that product is. Every company does this on all products and they all get the same deductions.
Taxes are figured on net profit not gross income. This goes for all companies large or small. This bill singles out the oil companies and changes the way they may deduct their business expenses and nobody else. Why not change everybody taxes, Ford, Microsoft, Subsim, assuming that Neal makes a profit. (hope he does)

What the heck does healthcare have to do with the price of bananas.
I can guarantee you pardner that YOU are not paying one penny for my healthcare at least not now but once Obama care kicks in that may change.

It's not my 401K, i don't have one, but everyone's pension, IRA 401K etc.
Many, many millions of Americans have at least one of these items.
50% or so of working people in the US do not pay any federal income taxes
I would venture to guess that there are a larger number of people that have a pension, 401K or an IRA than people that pay fed taxes and all 311,000,000 people are affected by high oil prices.


"also, these aren't "Mom And Pops Oil Shop" These are the big boys in the industry, the ones who can already afford to expand and do more drilling. They Want new places to drill, it's not like we coax them into that. Also, lets think of what happens when we let them write off their expansion plans...they get to double Dip. Not only do they get to "recoup some of the capital outlay" at the people's expense, they get to keep all the profits they get from the increased production of oil."

This is with out a doubt the silliest thing I have ever read on this board.
EVERY COMPANY IN THE UNITED STATES gets these same deductions and they all, hopefully, make a profit off the expansion.
I had a very small business and I took these very same deductions and made a profit off them and of course I payed taxes on that profit.
You really do not seem to understand how a business works, any business.

By the way we are trying to coax them into expanding domestic production at least according to what Obama was just saying.

Big oil or any company doesn't give a rats behind about you or me they only want to make money and if they make more money using foreign oil than that's what they will do. Before they go for US oil they need to be sure it is more profitable that any other source. This bill takes some of the profitability out of US oil.

There is no doubt that they are putting the screws to us but what are the alternatives. If it wasn't these guys it would be some other guys.
Big oil is big business and it takes a big company to operate it.
Big companies make big profits and theirs aren't any bigger than the several companies that Mookie listed in his post.

I really hate to be here defending big oil but this law really stinks, it's going to cost all of us more at the pump.

Magic

Actually, they don't. That is the reason for the bill. The purpose is to bring the oil companies in line with other industries. In the past, oil companies have been treated differently than other companies. This proposed bill's intention is to change that so that the oil companies are no longer treated differently but are treated similar to other companies.

What are the differences other than the depletion allowance?
The depletion allowance is only for those industries that have natural resources.
Oil and gas, timber, coal, gravel and almost all minerals. So no real difference here.

The allowance is given to recoup the capital cost of your asset, namely the natural resource that you own.
The secondary reason is to enhance the exploration and development of these resources.
The laws were first enacted in the 1920s and the current oil and gas deduction is as far as i can find out 15% of your yearly output.
The depletion allowance goes to the owner of the resource not necessary the oil company itself.
I am the owner of land which has natural gas, I receive the depletion allowance not the oil company that is pumping the gas.
I get to deduct the 15% from the income I receive from selling my gas to the oil company, I pay my current tax rate on all the rest of that income. This land is very good farm land and the well, access road and pipeline reduce the amount of available land to farm.
But having said that I do think we need to look at this deduction again.

Do you have a link or something to the other deductions, such as Section 199, as I would really like to know?
If I'm all wet I'll be the first to admit it.

Magic

I am afraid I don't, I just have the same bill that you read.

Never say never and never say exactly.
Section 199 is different than Section 179. 199 only deals with domestic production of anything not just oil. No domestic production than no Sec. 199 and Sec. 179 will apply and there is some difference between the two.
As far as I could find the IRS makes no distinction between oil and any other Sec. 199 company.

Don't get me wrong I don't like high fuel and energy prices any more than the next guy and that is why I oppose this bill. It will raise energy prices.
It will not reduce big oil profits. Consumers will be paying any extra taxes.
Higher energy cost drive up cost of just about everything else. Higher prices at the pump, grocery store, K mart, etc.

It's all a big smoke screen so the politicians can say "we are doing some and going after Big Oil." It's all about good TV sound bits.

Magic