Sunday, October 12, 2014

Econ 101 - Government subsidies, or Don't Be Silly

I keep reading about "progressives", a misnomer if I've ever heard one, who decry the government handouts to corporations... the most common target is what they lovingly refer to as "Big Oil"... Big Oil, they say, should not receive government subsidies because they're corporations... they're big enough to not need the money... and they're right; the companies do not need the money... but this shows a terrible naiveté about how money works.

let's say a barrel of crude oil costs $104, as it did in July of 2014... Big Oil is allowed a tax credit off this price due to an exception in the tax code... they're allowed to "write-off" about 15% of the cost of extraction from their federal taxes... now, this doesn't equate one-to-one to dollars they save, but some sources say this, along with other tax breaks, equates to over $4 billion dollars each year.

if we stop those tax breaks, the government gains $4 billion dollars... but where does that come from?... will Big Oil swallow that bitter pill?

don't be silly.

these costs will be borne by the consumers of Big Oil... the truckers who bring goods to market will pay the most... will they bear the lion's share alone?

don't be silly.

will the grocery stores and retail outlets pay that price for the increased costs of delivering the good they sell?

don't be silly.

the consumers, the American people, will shoulder the cost... reduction or removal of any government subsidy is an indirect tax on the populous... to believe otherwise is to believe in fairy tales.

speaking of fairy tales, there is something the government can do to offset the damage done to their citizens... they could reduce the taxes imposed by the government on the sale of gasoline and other petroleum products.

don't be silly.

the federal and state governments make 40 cents per gallon sold in the United States... Exxon, for example, made 7 cents per gallon (in 2011)... these progressives want Big Oil to pay these taxes out of their pockets, yet will they open their own purses to help those actually paying the costs?

Don't. Be. Silly.

  • Crude Oil: 67%.
  • Refining Costs and Profits: 12%
  • Distribution, Marketing, and Retail Costs and Profits: 9%
  • Taxes: 12%.
    • Federal excise taxes were 18.4 cents per gallon
    • State excise taxes average 23.52 cents per gallon

This Eye-Opening Map Shows The Reason Gas Is More Expensive And Who’s Profiting The Most - The Federalist Papers; by Steve Straub on July 14, 2014

Happy 100th Birthday, Big Oil Tax Breaks - ThinkProgress; by Rebecca Leber on March 1, 2013

What do I pay for in a gallon of regular gasoline? - US Energy Information Administration FAQ

How much oil is consumed in the United States? - US Energy Information Administration FAQ

Who Really Gets Rich Off High Gas Prices? - Wall Street Journal; By Drew Johnson on August 2, 2012

Who makes more from sales at the pump – industry or government? - ExxonMobile; by Ken Cohen August 8, 2012

Gasoline Tax Profits -; on April 11, 2008

Who Really Gets Rich Off High Gas Prices? -; by Richard Rider on August 9, 2012

State and Federal Treasuries "Profit" More from Gasoline Sales than U.S. Oil Industry -; By Jonathan Williams, Scott A. Hodge on October 26, 2005

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