Parties Seeking to Blame Each Other’s Policies for Gas Prices

[giblets]

This would be an example of noncritical thinking.

Think a second. What is the commonality between an extractionary industry and other industries.

If a resource is finite and is undergoing depletion it is in fact similar to depreciating the useful life of an asset which is similarly finite and undergoing depletion.

Comparing resource depletion to capital depreciation doesn't make much sense. It sounds more like chopping capital into bits and selling the pieces. Would I want tax deductions to exist for that? No. Also the market value of land containing natural resources is based on their potential profitability because of their inelastic supply, so the existence of a tax deduction for resource depletion would just cause the market value the land containing those resources to increase. Capital goods are made by people so the supply is much more elastic, so tax deductions for replacing worn out capital goods make more sense because the cost of those capital goods can't adjust they way the cost of buying land containing natural resources can.

[giblets]

Thankfully we have Conservapedia to shed some light on high gas prices

The United States is the only country in the world that does not have to pay for its imports in a foreign currency. The US can consume as much as it wants without acquiring a foreign currency to pay for it, because US dollars have been accepted everywhere. The US government is the only debtor in the world who can legally print US dollars to pay its debts. Access to cheap oil has been the greatest boon of owning the world's reserve currency. This has made gas cheaper in the United States than everywhere else in the developed world. Here is a comparison of how much less the United States pays for a gallon of gas compared to other developed nations:If oil is no longer priced in dollars, the price of oil for Americans will skyrocket and change our lives overnight. All that needs to happen is for other countries to begin preferring payment in something other than US dollars.

[Hauldren Collider]

What the **** is Conservapedia? Your latest strawman in attacking republicans?

[Ogie Oglethorpe]

Comparing resource depletion to capital depreciation doesn't make much sense.

In the context of comparison of a 'normal' industry and an extractive one they are indeed very similar and the reasons for them are a tax deduction to recover the costs of an asset. In the case of depreciation it is assumed that upon the expiration of the usable life of the asset asset value = 0. In the case of depletion again the idea is to provide a tax deduction for the reduction in value of a given asset (mineral holdings).

It sounds more like chopping capital into bits and selling the pieces. Would I want tax deductions to exist for that? No.

Surprise tax deductions exist for such activities and happen all the time. It would fall under the category of capital gain/loss. Industry sells off assets every day and either claims gain or loss accordingly.

Also the market value of land containing natural resources is based on their potential profitability because of their inelastic supply, so the existence of a tax deduction for resource depletion would just cause the market value the land containing those resources to increase. Capital goods are made by people so the supply is much more elastic, so tax deductions for replacing worn out capital goods make more sense because the cost of those capital goods can't adjust they way the cost of buying land containing natural resources can.

This is just a muddle of thought. The very definition of both depreciation and depletion only addresses the finite value of the existing assets not the impacts of replacement values. Regardless of whether the assets can be replaced or not the company has reduced its asset balance as a consequence of the production activities and thus is allowed tax deduction.

[giblets]

What the **** is Conservapedia? Your latest strawman in attacking republicans?

No, it's a website that allegedly has over 245 million views.

[Arrian]

Republicans want to eliminate all the tax deductions at once...

Bull****. I mean, hell, I wish that was true, but it's not.

Some people (myself included) are up for that. But GOP pols? No effing way.

-Arrian

[giblets]

In the context of comparison of a 'normal' industry and an extractive one they are indeed very similar and the reasons for them are a tax deduction to recover the costs of an asset. In the case of depreciation it is assumed that upon the expiration of the usable life of the asset asset value = 0. In the case of depletion again the idea is to provide a tax deduction for the reduction in value of a given asset (mineral holdings).

Surprise tax deductions exist for such activities and happen all the time. It would fall under the category of capital gain/loss. Industry sells off assets every day and either claims gain or loss accordingly.

So if an industry sells an asset, not only does it get the money that asset was worth, it also gets a tax deduction? I don't see how exchanging a capital good for money is a loss.

This is just a muddle of thought. The very definition of both depreciation and depletion only addresses the finite value of the existing assets not the impacts of replacement values. Regardless of whether the assets can be replaced or not the company has reduced its asset balance as a consequence of the production activities and thus is allowed tax deduction.

No, I think the company is replacing one asset (the raw materials in the ground) for another (money).

In any case even if you're right about this that doesn't justify the subsidies mentioned by the article, such as:

One lingering provision from the Tariff Act of 1913 — enacted to encourage exploration at a time when drilling often led to dry holes — allows many small and midsize oil companies to claim deductions for tapped oil fields far beyond the amount the companies actually paid for them.

I mean, if it's deduction for a cost of doing business why wouldn't it be based on what the company actually paid for it?

[Ogie Oglethorpe]

So if an industry sells an asset, not only does it get the money that asset was worth, it also gets a tax deduction? I don't see how exchanging a capital good for money is a loss.

Ohh for the love of christ man. When a company sells an asset they look at the book value of the item. In other words the sale price of the asset as it sits on their books (ie. reflective of its depreciated value). If the sale price of the item is greater than the book value of the item they have recognized a capital gain. If sales prices is less than the book value they have recognized a capital loss.

In any case even if you're right about this that doesn't justify the subsidies mentioned by the article, such as:

I mean, if it's deduction for a cost of doing business why wouldn't it be based on what the company actually paid for it?

Can't speak to that particular provision, but the idea of allowing tax deduction for mineral exploration activites has its own analog in normal industry in the R&D credit. Both are expensed activities in support of bringing a product to market, with an unknown chance of success.

[giblets]

Ohh for the love of christ man. When a company sells an asset they look at the book value of the item. In other words the sale price of the asset as it sits on their books (ie. reflective of its depreciated value). If the sale price of the item is greater than the book value of the item they have recognized a capital gain. If sales prices is less than the book value they have recognized a capital loss.

Okay, if the oil company eventually sells off the land for less what it's worth in their books, then I can see why that would merit a deduction. But simply taking oil out of the ground doesn't deserve a deduction IMO.

Can't speak to that particular provision, but the idea of allowing tax deduction for mineral exploration activites has its own analog in normal industry in the R&D credit. Both are expensed activities in support of bringing a product to market, with an unknown chance of success.

Sounds to me like the basic ideas behind these tax deductions might be legitimate, but the deductions are too big.

[Ogie Oglethorpe]

Bull****. I mean, hell, I wish that was true, but it's not.

Some people (myself included) are up for that. But GOP pols? No effing way.

-Arrian

I would simply define that as POLs. The ability to pick and choose winners via the tax code and the power that affords the POLs is everything regardless of party affiliation. The era of crony capitalism is as alive today if not more so than it was in the hey day of 2000-2008.

[Arrian]

Oh, sure. The Dems are happy to subsidize too. I thought we were taking that as a given.

There are a few policy wonks, left and right, who know that the right answer is to remove subsidies & tax deductions. It's nice to dream that such sanity would win out, but there's no political gain in it, is there?

-Arrian

[Ogie Oglethorpe]

Okay, if the oil company eventually sells off the land for less what it's worth in their books, then I can see why that would merit a deduction. But simply taking oil out of the ground doesn't deserve a deduction IMO.

If that were the case the mining industry companies would simply use the land up sell it and claim huge capital gains losses, and thus reap a huge one time tax deduction. The depletion allowance like the depreciation allowance allows the tax deductions to be more smoothed through the life time of the asset.

[ricketyclik]

Thankfully we have Conservapedia to shed some light on high gas prices

Originally Posted by Conservapedia Main Page
The United States is the only country in the world that does not have to pay for its imports in a foreign currency. The US can consume as much as it wants without acquiring a foreign currency to pay for it, because US dollars have been accepted everywhere. The US government is the only debtor in the world who can legally print US dollars to pay its debts. Access to cheap oil has been the greatest boon of owning the world's reserve currency. This has made gas cheaper in the United States than everywhere else in the developed world. Here is a comparison of how much less the United States pays for a gallon of gas compared to other developed nations:

United States $3.88 (national avg.)
Foreign locale per gal. (% over US)
Oslo, Norway $7.41 (172% higher)
Berlin, Germany $6.82 (151% higher)
London, England $6.60 (143% higher)
Rome, Italy $6.40 (135% higher)
Paris, France $6.04 (122% higher)
Tokyo, Japan $5.40 ( 98% higher)

If oil is no longer priced in dollars, the price of oil for Americans will skyrocket and change our lives overnight. All that needs to happen is for other countries to begin preferring payment in something other than US dollars.

I remember this was one of the reasons that was put forward (by critics) as to why the US was so gung-ho to take out Saddam Hussein. After GWI he was trading oil in Euros (well, the European oil companies that managed to get hold of the reserves were, anyway, and apparently he was allowing/pushing it).

[Ogie Oglethorpe]

Verdict in from Congressional Research Service

The Administration estimates that the tax changes outlined in the budget proposal would provide $22.8 billion in revenues over the period 2012 to 2016, and over $43.6 billion from 2012 to 2021. These changes, if enacted by Congress, also would reduce the tax advantage enjoyed by independent oil and natural gas companies over the major oil companies. On what would likely
be a small scale, the proposals also would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.This report will be updated as events warrant.

Time and again it has been shown, tax increases to corporations are ultimately passed onto the consumer. Likewise removal of so called 'preferential' tax deductions manifest themselves in a reduction of capital as the risk of development starts to outweigh the aggregate benefit.

http://www.nationalaglawcenter.org/a...crs/R41669.pdf

[Jon Miller]

Why isn't it a good thing to tax gas/oil properly? Why do we want to encourage their consumption and inefficient behaviors/practices?

JM