http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aP_1wrIyt1Nc Obama May Levy $15 Billion Tax on Oil Company Profit By Daniel Whitten May 1 (Bloomberg) -- Democratic presidential candidate Barack Obama's proposal for a windfall profits tax on oil companies could cost $15 billion a year at last year's profit levels, a campaign adviser said. The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can't afford their energy bills. ``The profits right now are so remarkable that one could trim them 10 percent or so, which would turn out to be somewhere in the $15 billion range,'' said Jason Grumet, an adviser to the Obama campaign. Obama's plan may be three times larger than the $50 billion, 10-year plan contemplated by his Democratic rival, New York Senator Hillary Clinton. Republican candidate John McCain, an Arizona senator, has no plan to raise oil and gas industry taxes, said his economic adviser, Douglas Holtz-Eakin. Oil companies would still have ample reason to ``continue to pursue production, while at the same time providing relief to consumers,'' Grumet said. A flurry of energy proposals from presidential candidates and lawmakers has come after crude oil futures prices reached $119.93 a barrel on April 28. Retail gasoline prices hit a record $3.603 a gallon this week, according to the U.S. Energy Department. Obama's Proposal Among the options Illinois Senator Obama is mulling is imposing a 20 percent tax on the cost of a barrel of oil above $80, said Grumet, who spoke at a conference in Washington today. ``The industry has profited greatly -- over $150 billion in 2007 -- due to global instability fueled by conflict in Iraq, failing domestic fiscal policies that have weakened the U.S. dollar and skyrocketing global demand resulting from a lack of investment in alternatives,'' said the Obama fact sheet. Energy companies argue that new taxes will discourage production at a time when supply is needed most. Clinton would impose a $20 billion windfall profits tax on oil companies over the next decade and repeal $30 billion in tax breaks over 10 years to pay into a so-called strategic energy fund, said Brian Deese, Clinton's economic policy director. Gas-Tax Holiday Clinton has proposed a gas-tax holiday for the summer paid for by about $9 billion in windfall profits taxes on oil companies. She would repeal an 18.4 cent per-gallon tax on gasoline and a 24.4 cent per-gallon tax on diesel fuel. Obama opposes the idea, saying it will provide minimal relief to consumers. Oil companies got about $12 billion in tax breaks last year, Grumet said, and the windfall tax would aim to roll back all of those subsidies. The top five oil companies, San Ramon, California-based Chevron Corp.; Houston-based ConocoPhillips; Irving, Texas-based Exxon Mobil Corp.; BP Plc in London; and the Hague-based Royal Dutch Shell Plc. reported $123 billion in profits for last year. Exxon Mobil said first-quarter net income rose to $10.9 billion, or $2.03 a share, from $9.28 billion, or $1.62, a year earlier. The profits report fell short of analyst estimates as production dropped and profit margins from refining narrowed. To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net Last Updated: May 1, 2008 20:05 EDT
I think this is a dumb idea - it's not Exxon's fault the price of oil skyrocketed. When other goods go up in price due to the market, we don't go after the producers of those items. The advisor says: <I>Oil companies got about $12 billion in tax breaks last year, Grumet said, and the windfall tax would aim to roll back all of those subsidies.</i> Why have a tax and a subsidy that cancel each other out? Why not just scrap the subsidy, which seems reasonable depending on what the purpose of the subsidy is.
This is f'ing horseschit. Obama is clueless. We're facing an energy supply/demand crunch worldwide, and much of that supply is found in some pretty unsavory political spots around the world. The US should be developing its domestic oil and gas supply, not removing incentives to do so. This move by Obama is absolutely stupid and he's playing to the "ignorant class" that just wants to take revenge on big bad oil companies. Please think this crap through, Obama, because clearly you haven't done so to date.
My dad works in the oil indusrty he made a lot of money the last few years, but when a company is making 40 billion dollars in profits I don't have a problem taxing them 15billion. Now XOM will make 25 billion instead of 40 billion. The us has like the largest coal supply in the world, more than enough to power the US. So when you are talking about energy you are strictly talking about OIL.
should we start taxing all of our most profitable companies? maybe we can get GE next. this tax idea is an absolute joke. the worst thing about it is how it taxes based on oil prices and not actual profits.
A masterful bit of theater to usurp the gas tax stupidity BRAVOBAMA But I agree -simply eliminate the exploration subsidies/breaks - those are effectively a transfer payment from the american people to XOM CVX etc. Not useful.
If you want to be cynical, the language of a "tax on big oil" resonates with the public better than "removing subsidies from big oil". For the same reasons why a joe blow blue collar worker has issues with "handouts", but are okay or apathetic to the government giving a "helping hand" to a constituent's favored interests in order to "spur the economy"...
Big oil companies make a lot of money because they are huge. It's not like they are making great margins or anything. XOM made almost $11B last quarter, but probably had revenues of close to $110B. And what's the point of discouraging companies to be as profitable as possible? Isn't that what capitalism is about?
Lets look at a lot of the other mega-oil companies. A bunch of them outside the US are state owned. Compared to the rest of the world we don't tax them enough, and we have been giving them breaks through the years.
Weird... not being too familiar with the way the subsidies and taxes are set up, I can see how eliminating subsidies might make more sense to some. However, I do think it's curious that there's a lot of hostility to the idea of taxing oil profits in this thread, while the other thread was almost unanimous in rejecting the McCain/Clinton summer gas tax break. Btw, many economists think taxes on oil should be higher, for a number of reasons: http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto.html
Surely Obama realizes that only three of those five companies are U.S. based and none of them have profits that are purely domestic. I'm sure the government is going to tell Shell and BP, "You make too much money here, so we're gonna tax the hell out of the excess. And by the way, you make too much money in all of the other countries you work in...........so we're gonna tax that too." Then again, it is campaign time. It is much better to look good than to be good.
I don't care if your daddy works in the oil patch. Your logic about how much profit is "enough" is borderline communist. I'm aware of our coal resources, but coal doesn't put gasoline in my car or provide fuel for my first class flights. Crude oil does.
Wouldn't the cost of exploration, drilling and research not still be a tax deductable business expense? Couldn't income directed at developing renewable energy be made deductable? If margins are so thin, why profits are so high? One possible explanation of the profits is the appreciation of assets already secured at lower prices, owning oil producing assets that were profitable at $70 yet the oil that come out of them now is sold at $110. If I owned something that was valued at $70 in 2005 and sold it for $110 in 2008, stock or real estate or collectables, I would owe capital gains tax on those assets. Why isn't it the same for Oil? I ( and a million other Americans) own royalty interests in several producing properties, as the price of oil goes up my royalty checks go up; but, I pay taxes on that royalty as regular income. I make more and I pay more taxes, my tax bracket has gone up to. (this is borderline communist! ) Exxon should probably be treated the same. Coal could be made to put gas in your car or kerosene in your airplane if America put it's national security concerns ahead of it's pocketbook. Tax oil and give subsidies to coal gasification if that's what makes sense. But business as ususal, unabated capitalism is shortsighted and dangerous in the long term. It would be so easy to shut down the Strait Of Hormuz, a third rate power with French technology could do it.
You invested in royalty interests with zero knowledge of accounting, finance or the oil industry. Wow, now that is a leap of faith. Much like supporting Obama. You'd make a great Obama drone voter. [parrot voice]SQUAWK! CHANGE! OBAMA! THIS COUNTRY IS READY FOR A HALF-BLACK PRESIDENT! SQUAWK! CHANGE! HOPE! SQUAWK! NO SUBSTANCE![/parrot voice]
