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View Full Version : Obama ditches widfall profits tax on the oil companys



Bruce MacPherson
12-03-2008, 12:15 AM
Well there goes that lower and middle class tax rebate he promised before the election. The industry is pleased, the enviros not so much.
Heaven forbid I might be inclined to think this guy has a clue.

mac

backpasture
12-03-2008, 07:51 AM
Well there goes that lower and middle class tax rebate he promised before the election. The industry is pleased, the enviros not so much.
Heaven forbid I might be inclined to think this guy has a clue.

mac

At $80/barrel, the 'windfall' that oil companies were getting at $150/barrel is gone. Hard to have a 'windfall tax' without a 'windfall'.

Heaven forbid you might be inclined to understand what 'windfall' means.

Matt McKenzie
12-03-2008, 08:01 AM
I suppose all the folks who wanted to impose a "windfall profits tax" when the price of oil was $140 a barrel are now willing to impose the inverse and give them a huge tax break since it's now $50 a barrel. Or not.

backpasture
12-03-2008, 08:12 AM
I suppose all the folks who wanted to impose a "windfall profits tax" when the price of oil was $140 a barrel are now willing to impose the inverse and give them a huge tax break since it's now $50 a barrel. Or not.


Ya. Or not. They already GET huge tax breaks.

Legacy 6
12-03-2008, 08:57 AM
When they are paying additional taxes, they just pass it right along to the consumer as part of the "overhead" anyway.

Heaven forbid anyone understands corporate tax.

By the way, what is a "windfall profit" compared to a normal "profit"? And besides, that thing never made sense anyway. You're going to take money from the oil company, in order to give it to the consumer, so they can give it back to the oil company...?? That's how I saw it from the beginning. I'm sure Backpasture will come up with how many scientists are out there who might think I'm stupid... and they might be right. But if they're so smart, how come NOBODY understands this.

Drinkin Kool-Aid regards

K G
12-03-2008, 09:07 AM
What's going to be interesting is what happens AFTER 12/17, the date of the next OPEC minister's meeting. This past weekend they announced that $75 a barrel was a "fair" price.....:-x......so they'll move to reduce production to the point that they reach that price.

The pain that the Big 3 (and other) automakers are going through is going to work out in the long run IF they truly commit to making more fuel efficient cars. If we USE less, we'll cut OPEC's extorted profits naturally by using less of their product. They won't be able to artificially raise the prices in the world economy if demand for the product shrinks.

Now, if we can just make sure that China, Russia, and other developing countries don't overuse the resource.....we'll see.

JMHO, as always.....;-)

kg

backpasture
12-03-2008, 09:27 AM
When they are paying additional taxes, they just pass it right along to the consumer as part of the "overhead" anyway.

Heaven forbid anyone understands corporate tax.

By the way, what is a "windfall profit" compared to a normal "profit"? And besides, that thing never made sense anyway. You're going to take money from the oil company, in order to give it to the consumer, so they can give it back to the oil company...?? That's how I saw it from the beginning. I'm sure Backpasture will come up with how many scientists are out there who might think I'm stupid... and they might be right. But if they're so smart, how come NOBODY understands this.

Drinkin Kool-Aid regards

For an example of 'Windfall Profit', see Exxon Mobil's $14 BILLION profit for the 2nd quarter this year -- the largest profit ever recorded for a US corporation. It broke the previous record, which was set by (you guessed it) Exxon Mobil, in the 1st quarter of this year.

Your assumption that oil companies can just 'increase their prices' and pass a tax on Net Profits (and therefore effectively reduce their 'out of pocket' tax payments) shows your lack of understanding about basic accounting principles. The only way to effectively reduce the 'out of pocket' cost of a Net Profit tax is to reduce the Net Profit. And, assuming all else holds steady (expenses, etc) , increasing prices does NOT reduce Net Profit, it increases it.

Don't assume that because YOU don't understand something, that NOBODY understands it.

Legacy 6
12-03-2008, 09:43 AM
For an example of 'Windfall Profit', see Exxon Mobil's $14 BILLION profit for the 2nd quarter this year -- the largest profit ever recorded for a US corporation. It broke the previous record, which was set by (you guessed it) Exxon Mobil, in the 1st quarter of this year.

Still doesn't tell me what a windfall profit is.


Your assumption that oil companies can just 'increase their prices' and pass a tax on Net Profits (and therefore effectively reduce their 'out of pocket' tax payments) shows your lack of understanding about basic accounting principles. The only way to effectively reduce the 'out of pocket' cost of a Net Profit tax is to reduce the Net Profit. And, assuming all else holds steady (expenses, etc) , increasing prices does NOT reduce Net Profit, it increases it.

I still think you don't understand that if the government places a tax on a company, that company has to figure that into their overhead costs... I don't have to "quote" (since you didn't) these huge lofty "accounting principles" to understand that the more my business is taxed, the more I have to charge to my customers.


Don't assume that because YOU don't understand something, that NOBODY understands it.

I just don't assume that because YOU can quote something that SOMEONE ELSE understands that YOU understand it.

backpasture
12-03-2008, 10:08 AM
Still doesn't tell me what a windfall profit is.

Alright, then I will copy and paste what Wikipedia says:


Windfall profits are a type of windfall gain. They can occur due to unforeseen circumstances in a product's market, such as unexpected demand or government regulation. Since the profits were unforeseen, some legislators believe that taxing them at a higher rate, or confiscating them outright, should not hurt the company. This type of taxation is known as a windfall profits tax.


I still think you don't understand that if the government places a tax on a company, that company has to figure that into their overhead costs... .

You don't understand that 'overhead costs' are before Net Profit. There are NO overhead costs on Net Profit. Net Profit is the amount of money you have left over after you pay all of your 'overhead costs'.

This stuff isn't rocket science, it's Accounting 101.

Hoosier
12-03-2008, 10:15 AM
So if your a waitress and someone gives you a $50 tip when you are expected to get a$10 tip that's windfall, and the government should get $40, Oh I get it. Extrapolating of course that seems to be the way we do things.

backpasture
12-03-2008, 10:26 AM
The pain that the Big 3 (and other) automakers are going through is going to work out in the long run IF they truly commit to making more fuel efficient cars. If we USE less, we'll cut OPEC's extorted profits naturally by using less of their product. They won't be able to artificially raise the prices in the world economy if demand for the product shrinks.


Personally, I think that if the Big 3 want a bail-out, that they should get it from the oil companies. After all, Detroits' gas guzzlers are a huge factor in the oil industry's record breaking profits over the past couple of years. Their profits in the first 6 months of this year are more than what the Big 3 are currently asking Congress for.

Bruce MacPherson
12-03-2008, 10:45 AM
At $80/barrel, the 'windfall' that oil companies were getting at $150/barrel is gone. Hard to have a 'windfall tax' without a 'windfall'.

Heaven forbid you might be inclined to understand what 'windfall' means.

Always interesting having a conversation with someone that thinks they are the smartest person in the room.
Frankly I don't know why the rest of us bother to post.
With your stellar grasp of the issues, the ability to differentiate between gross and net income and the Wickipedia definition of windfall profits I, for one, am duly impressed.

Mac

backpasture
12-03-2008, 10:59 AM
With your stellar grasp of the issues, the ability to differentiate between gross and net income and the Wickipedia definition of windfall profits I, for one, am duly impressed.


You shouldn't be surprised that your snide post elicited a snide response.

I agree that 'gross vs net' is pretty remedial stuff. I only spelled it out because Legacy 6 obviously didn't understand it (and specifically asked for the definition of a 'windfall profit'.)

/Now back to our regularly scheduled sniping.

Hoosier
12-03-2008, 11:10 AM
So backpasture why don't you just post your list off stupid people. We can all get our droll cups sit in the corner and read your words of wisdom. Or we could just turn RTF into your blog. That would be fun for all.

Bruce MacPherson
12-03-2008, 11:26 AM
Still doesn't tell me what a windfall profit is.


And the Wickipedia definition will not nessecarily tell you either. The argument can be made that these profits were not necessarily unforseen and certainly, at least as it applies to the oil companies presently, not due to government regulation. The problem is, quite often and depending on the political party in power, that windfall profits are a moving target and always arbitrary.

Buzz
12-03-2008, 11:33 AM
I still think you don't understand that if the government places a tax on a company, that company has to figure that into their overhead costs... I don't have to "quote" (since you didn't) these huge lofty "accounting principles" to understand that the more my business is taxed, the more I have to charge to my customers.


You can only pass your costs to your customer 100% in an environment where you have no competition from others who provide the same product or service that you do.

Hoosier
12-03-2008, 02:15 PM
The profit is based on a % of invested money. I have a small construction business. But the way I figure my bids and profit is this. Exp. Say I have a 400 sheet drywall job. Not figuring any taping or framing. I order the sheetrock for .32 cents a foot or $6145 add 15% or $920 for supplying and looking at prints. Labor cost me about $50 an hour per guy. I charge $65. Any changes to these costs I raise my price accordingly. But my markup on materials is still 15%. It's not a windfall. An increase in materials cost means I'm risking more of my money to get the job done. I also add a markup if I"ve had prior dealings with the person and they were a pain in the ass, or tried to nickle and dime me.

Legacy 6
12-03-2008, 02:45 PM
You don't understand that 'overhead costs' are before Net Profit. There are NO overhead costs on Net Profit. Net Profit is the amount of money you have left over after you pay all of your 'overhead costs'.

This stuff isn't rocket science, it's Accounting 101.

Okay, now that we have that out of the way, condescending much? So now that you have that "net profit" and you spend your net profit on materials and equipment, where you have to pay more taxes, and use the net profit to increase the pay or give bonuses to employees or even (GASP!) yourself (since it's your fricken' business) when they and you have to pay taxes on those as well...

I don't have to go further do I? Accounting 101 doesn't usually see the 2nd and 3rd order effects of taxes.

It's cold in here regards

WRL
12-03-2008, 03:28 PM
Okay, now that we have that out of the way, condescending much? So now that you have that "net profit" and you spend your net profit on materials and equipment, where you have to pay more taxes, and use the net profit to increase the pay or give bonuses to employees or even (GASP!) yourself (since it's your fricken' business) when they and you have to pay taxes on those as well...

I don't have to go further do I? Accounting 101 doesn't usually see the 2nd and 3rd order effects of taxes.

It's cold in here regards

Legacy 6, I hate to have to agree with Backpasture but you ARE getting your terms messed up.

Gross Income.....money coming in. So you sell gas for $1.00 a gallon. That would be gross income. It costs you .10 gallon to buy it, .10 gallon to refine it, labor costs are .10 gallon. So the $1 minus the .30 would be .70. You then pay taxes ON the now its called Gross Profit. After you pay your taxes on that amount (gross profit) then you end up with Net Profit. Net profit is the amount you actually MAKE. So there are no more costs coming out of Net Profit. However, you (as a business owner) would not be doing a very good job if you did not keep track of your Gross Profit. Most companies have a certain percentage that they like to hit. Too high of a Gross Profit is price gouging (and may price yourself out of the market) and too low and you will go out of business. Gross Profit, THAT is where you make adjustments and then add to the price (might have to bump it up to $1.10 gal if tax rate jumps from say 20% to 30%). that is where the costs get passed on.

(please please accountants, this is the cliff note version, and very simplified. don't jump all over me)

WRL

backpasture
12-03-2008, 03:29 PM
So now that you have that "net profit" and you spend your net profit on materials and equipment, where you have to pay more taxes, and use the net profit to increase the pay or give bonuses to employees...


Wrong again. You don't spend your 'net profit' on materials and equipment, or employee compensation. 'Net Profit' includes what is left over AFTER you have paid all of that stuff.



I don't have to go further do I?

No, you don't (but I'm sure you will). You've already demonstrated that your basic premise ("You're going to take money from the oil company, in order to give it to the consumer, so they can give it back to the oil company...??") is based upon your complete misunderstanding of basic accounting principles.

backpasture
12-03-2008, 03:31 PM
Legacy 6, I hate to have to agree with Backpasture

It wasn't THAT painful, was it? ;)

Legacy 6
12-03-2008, 03:46 PM
So instead of helping me see your way, you'll just call me an idiot. At least WRL is trying to help me get my terms straight...

I'm sorry that you disagree, and I'm sure many of the principles you've quoted apply in the big bisiness world, of which I'm not part of... but I still think that for many small businesses, your net profit and your gross profit get re-invested into your business, or go to something else.

I don't think that every business' end of the month statement is zero because they've already paid everyone, their taxes, bonuses, overhead costs, etc. But, educate me on what the evil corporations and evil businesses are doing with this net profit...?

You'll catch more honey with flies than bees regards....

oops.

IowaBayDog
12-03-2008, 05:05 PM
You can only pass your costs to your customer 100% in an environment where you have no competition from others who provide the same product or service that you do.


Wrong answer, you can also do it 100% where your competition is also paying and passing on those taxes as well, if all the competition is domestic.

So the only ones who can't pass it on is where there is significant competition from a foriegn supplier. Taxing Domestic companies puts them at a competitive disadvantage to Foriegn companies unless an import tax/levy is imposed to offset. Highly unlikely since it would violate most if not all of our current trade agreements.

Corporations don't pay taxes, their customers do. Its not that difficult to figure out.

IowaBayDog
12-03-2008, 05:12 PM
This stuff isn't rocket science, it's Accounting 101.


Apparently you flunked, or only took the Wikipedia version.

A business figures ALL its expenses before setting the price of its product. Taxes whether they be on wages, capital equipment, or profits are figured in the price of goods. If they are paying 10% on net today and know they will pay 20% on net tomorrow, the price will be adjusted accordingly. Depending on the elasticity of the Demand for their product they will make up some or all of the difference.

Try a real economics book not an internet hack site. I can borrow you some of mine if you like.

Patrick Johndrow
12-03-2008, 06:41 PM
So how many politicians have kept their campaign promises?

Legacy 6
12-03-2008, 07:05 PM
Corporations don't pay taxes, their customers do. Its not that difficult to figure out.

Iowa, I'm sorry man, but you're just not going to convince Backpasture that the customers pay corporate taxes. I tried, and as usual BP's superior brainpower and grasp of higher intellectual concepts (like accounting 101) trump my stupid stupid conservative brain stuff.

BP, it's not that I have anything against you... I just can't compete with someone so academicly superior in every way.

I left tha spellering erors reguards

Bruce MacPherson
12-03-2008, 08:07 PM
So instead of helping me see your way, you'll just call me an idiot. At least WRL is trying to help me get my terms straight...

I'm sorry that you disagree, and I'm sure many of the principles you've quoted apply in the big bisiness world, of which I'm not part of... but I still think that for many small businesses, your net profit and your gross profit get re-invested into your business, or go to something else.

I don't think that every business' end of the month statement is zero because they've already paid everyone, their taxes, bonuses, overhead costs, etc. But, educate me on what the evil corporations and evil businesses are doing with this net profit...?

You'll catch more honey with flies than bees regards....

oops.

Frankly I cringe when I hear people throw terms around, and they have been thrown around, like gross and net Profit. You have Income . Take all the money made in a month or year, subtract operating expenses, whatever they may be, and you have net Profit or loss. If at the end of the year you have made more than you have spent you have Profit. You can choose to do whatever you like with this profit. Most business reinvest at least a portion to make their business even more profitable. This is America, this is how we do it here. It is not yet a crime to make a lot of money. It has always been popular within a certain political class to demonize those companies that have been highly successful for one reason, to extract a larger amount of money, in the form of taxes, than they are already receiving.
Some of us that have actually owned and run a business don't begrudge these big companies one dime of profit they have made.

Marvin S
12-03-2008, 08:44 PM
A business figures ALL its expenses before setting the price of its product. Taxes whether they be on wages, capital equipment, or profits are figured in the price of goods. If they are paying 10% on net today and know they will pay 20% on net tomorrow, the price will be adjusted accordingly. Depending on the elasticity of the Demand for their product they will make up some or all of the difference.

To add to your post - businesses that perform in other country's also have an element of risk - you name it, they experience it. In extremely risky country's that risk might demand that they receive a return approaching 50% yearly on their investment to deal with the political risk. When I did Mining Economics the political risk was rated as high as expecting a 100% yearly return on investment in some country's.

They also have the risk associated with dry holes, &/or a hostile environment to get that product.

& once they get the product to market there is the grease my palm risk associated with our political system.

Has everyone forgot that government has extracted more in taxes from the oil companies than the oil companies have made in profit over the years.

For the people complaining, there is always the alternative, don't buy their product, don't contribute to the oil company's profit. Ride your bike, your donkey or do shank's mare - No one is forcing anyone to buy. I personally like the convenience of going to a service station, knowing that in most instances the product received will be uniform to some standard & will allow me the convenience of going where I desire to go in some comfort.

Free Market regards!! :)

Henry V
12-04-2008, 07:15 AM
Yes, heaven forbid a leader make a pragmatic decision to change his mind based on a change in circumstances. I think Obama should just stay the course based on what he said during his campaign or what his gut tells him rather than take a thoughtful and pragmatic approach to leading this country based on reality. The record is clear that leading by ideology and your gut despite a change in circumstances is a far superior approach.

Hoosier
12-04-2008, 09:11 AM
Yes, heaven forbid a leader make a pragmatic decision to change his mind based on a change in circumstances. I think Obama should just stay the course based on what he said during his campaign or what his gut tells him rather than take a thoughtful and pragmatic approach to leading this country based on reality. The record is clear that leading by ideology and your gut despite a change in circumstances is a far superior approach.

Does this mean we should start worrying about paying our own mortgage and putting gas in our cars again.

badbullgator
12-04-2008, 09:59 AM
I suppose all the folks who wanted to impose a "windfall profits tax" when the price of oil was $140 a barrel are now willing to impose the inverse and give them a huge tax break since it's now $50 a barrel. Or not.


:D:D:D good point
I don't think that will happen, but at $1.59/gal I have been running my boat through enough to warm the earth....
still trying to do my part to offset the carbon offsets people are dumb enough to buy

Buzz
12-04-2008, 11:28 AM
Wrong answer, you can also do it 100% where your competition is also paying and passing on those taxes as well, if all the competition is domestic.


Then the are not truly in competition.

Hoosier
12-04-2008, 11:28 AM
One thing I don't get,is people wanting to rape the oil companies, when their 401k's probably have a lot of oil stock in them. Your stealing from yourself. I guess it makes them feel better to know some rich guy at the top had it taken away from him. Then it gets added on at the pump.

Steve Amrein
12-04-2008, 11:47 AM
One of the key elements of this discusion is that even the billions in profit being made and at a record amount the percent of profit is whats missing. Just because they made billions in profit does not necessarily make the percent of profit high. I thought last quarter was arond 10 or 11 percent. BFD. I think wally mart and microsoft did around 20% .I made 13% profit last year so does that make me qualify to have a windfall profit tax levied against me as well. How about the years I did not make a profit unless I missed it I did not get a windfall loss check. I think that the oil companies have been made to look evil. Use oil or not its your choice but right now the world runs on gas and oil.

BTW how come every day when gas went up it was the leading story and now that its going down I never hear about it.

Bruce MacPherson
12-04-2008, 12:25 PM
Yes, heaven forbid a leader make a pragmatic decision to change his mind based on a change in circumstances. I think Obama should just stay the course based on what he said during his campaign or what his gut tells him rather than take a thoughtful and pragmatic approach to leading this country based on reality. The record is clear that leading by ideology and your gut despite a change in circumstances is a far superior approach.

I will admuit that my post may have come across to some as sarcastic, it may have been although not totally. My concern about Obama was, and continues to be, the depth of his ideology.I did not drink the cool aid so I am not yet convinced that he has the depth of experience nor the business acumen to effectively lead this country during these trying times.
Some of his recent appointments and comments provide at least a glimmer of hope.

IowaBayDog
12-04-2008, 01:08 PM
Then the are not truly in competition.


They aren't truly in competition because they are all subject to the same tax code :confused:

Buzz
12-04-2008, 05:48 PM
They aren't truly in competition because they are all subject to the same tax code :confused:

No, I'm saying that if they would all pass 100% of a cost increase on to the consumer, and none of them is willing to eat some cost in order to increase sales, then that's not competition.

Marvin S
12-04-2008, 05:55 PM
No, I'm saying that if they would all pass 100% of a cost increase on to the consumer, and none of them is willing to eat some cost in order to increase sales, then that's not competition.

You may not have competition in Brookings, SD but out here in a Blue state we have plenty of competition. It is not unusual to find a 40 cent difference in a twenty mile trip. We have a string of stations that are consistently less expensive than others which get our business.

M Remington
12-04-2008, 06:19 PM
One thing I don't get,is people wanting to rape the oil companies, when their 401k's probably have a lot of oil stock in them. Your stealing from yourself. I guess it makes them feel better to know some rich guy at the top had it taken away from him. Then it gets added on at the pump.

People want to rape the oil companies because they claim that gasoline costs are beyond their control, post the highest net profits ever, and receive government tax breaks.

Henry V
12-04-2008, 07:51 PM
One of the key elements of this discusion is that even the billions in profit being made and at a record amount the percent of profit is whats missing. Just because they made billions in profit does not necessarily make the percent of profit high. I thought last quarter was arond 10 or 11 percent. BFD. I think wally mart and microsoft did around 20% .I made 13% profit last year so does that make me qualify to have a windfall profit tax levied against me as well. How about the years I did not make a profit unless I missed it I did not get a windfall loss check. I think that the oil companies have been made to look evil. Use oil or not its your choice but right now the world runs on gas and oil.

BTW how come every day when gas went up it was the leading story and now that its going down I never hear about it.
I understand your argument on the percentage of profit and you are correct from my point of view. What seems to be missing in this discussion is what percentage of their profits is made from extracting a "public resource". Isn't most all the coastal oil, Alaskan oil, Gulf oil, etc. produced in the U.S. actually owned by us? Are U.S. citizens getting paid enough for the leases to extract our oil? Maybe we need to raise the lease fees or the lease cost should be indexed to the price of oil? The same goes for natural gas extraction. Maybe it is indexed already but I seem to recall that there is a flat fee????

I have seen gas prices on the news quite a lately. I was wondering why the price hasn't jumped. Isn't it this time of year that they are always "switching to a winter blend" which causes a price increase. I guess not this year.

Hoosier
12-04-2008, 07:55 PM
People want to rape the oil companies because they claim that gasoline costs are beyond their control, post the highest net profits ever, and receive government tax breaks.

I don't know about you Remington, but I think the shareholders of the most in demand product in the world should be able to earn some money on their investment. And if they invest large sums of money, the return should proportional to amount invested. If the cost of a barrel of oil triples. Guess what your investing more. 10% of a billion is more then 10% of a million.

Buzz
12-04-2008, 08:54 PM
You may not have competition in Brookings, SD but out here in a Blue state we have plenty of competition. It is not unusual to find a 40 cent difference in a twenty mile trip. We have a string of stations that are consistently less expensive than others which get our business.

I have not recently seen a single gas station with prices varied by even a penny. And I do get out of Brookings now and then... We did have a station west of Brookings that was consistently 10 cents below the rest, but that ended about a year ago. We also had a gas station at a casino just south of the ND border on I-29 that was always at least 20 cents cheaper than anywhere on this side of the state. I hear that the Indians don't have to pay the state tax, don't know if that's true or not. They have actually been higher than anyone else since last spring. If I drive to Sioux Falls I might save a nickel. The owner of Harms Oil lives right behind me. They distribute to most of East River. I'll have to have this conversation with him next time I see him out with his kids in the back yard... He did tell me that with the high prices, everyone thought he must be really making out. Actually the distributers and gas station owners were getting hosed, while big oil was raking it in.

Buzz
12-04-2008, 08:59 PM
People want to rape the oil companies because they claim that gasoline costs are beyond their control, post the highest net profits ever, and receive government tax breaks.

I think that the control of oil prices lies with hedge fund managers. I could be wrong. Seems that OPEC is trying to get a handle on them now.

Bruce MacPherson
12-04-2008, 11:33 PM
People want to rape the oil companies because they claim that gasoline costs are beyond their control, post the highest net profits ever, and receive government tax breaks.

So no matter what they have to pay for the oil that they refine, which many of these large companies do, exploration costs, equipment, labor, research and development, compliance with a whole bunch of government regulations and sundry other things, that gasoline should remain at some fixed price that you deem acceptable? People want to rape the oil companies because it's what most people think that figure they are at the mercy of forces beyond their control.