Solar-energy-generation costs, for example, fall around 8% each year as technologies improve and capacity expands. Imagine how much faster the gap could close if the fossil fuel competition wasn't on government-prescribed steroids, i.e., shameful corporate welfare largesse
Note: Maybe one day in the distant future, a president of the United States will announce to the nation, "The era of big government big oil welfare is over."
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By Rocky Boschert
Financial Editor
To hear some tell it, we have lost our appreciation for free markets in America. For example, CNBC’s corporate supplicant Joe Kernan in his new book about American business says we need to be "defending our kids from the liberal assault on capitalism." Or how about former BB&T banking CEO John Allison, who is no stranger to corporate bailouts, offering $2 million grants to colleges that create "courses in capitalism."Well, I agree with Joe and John. And thank God some others of the Wall Street elite still believe in a free market economy that allows businesses, especially big businesses that have been hugely profitable for decades, to feign for themselves and not take government handouts. Apparently we seem to have forgotten one of capitalism's most fundamental premises: New and small companies deserve the opportunity to succeed.
So I assume all you Republican free markets purists – who still remember (or understand) what a free markets economy is – must be furious with US Senate Republicans for recently defeating a Democratic proposal to end billions of dollars in tax breaks for the hugely profitable American oil companies.
To be sure, the reality TV-like D.C. debate over big oil fossil fuel handouts was framed within the typically manipulative political prism. Democrats hoped to blunt criticism that they don't care about deficits, while Republicans wanted to rally their anti-government tax-phobic base who think green energy is some sort of socialist program.But ending oil and gas subsidies should be about something much larger: creating a marketplace in which renewable-energy companies can compete fairly with fossil-fuel incumbents. For too long we've heard petroleum advocates say that solar, wind, and biofuel are failed experiments. They've had their chance, but have been unable to demonstrate cost-effectiveness.
What this ignores, of course, is that American oil and gas companies have had a century of built-in advantages. For example, they are allowed to deduct "intangible drilling costs," including labor and drilling fluids, the moment a well is tapped (even if it proves to be dry).
And then there's the "depletion allowance," which allows certain extractors to shelter around 15% of a well's production from the IRS. And deductions for “bribery” royalties paid to foreign governments. And the oil and gas disaster liability cap that remains at just $75 million, more than a year after the BP (BP) rig explosion. Then there's Section 199, which allows profitable oil and gas companies to deduct 6% of net income.
To be sure, there also are tax breaks for green-energy companies. But most of those government handouts are temporary, including low-interest loans from the 2009 stimulus, with renewables receiving only around 5% of some $20 billion worth of federal energy tax breaks, excluding subsidy-rich ethanol, which is a separate but equal taxpayer travesty.
Some of these subsidies are very important to individual companies, but the renewable-energy industry's best long term play is to support the elimination of all federal energy handouts. If the playing field is truly leveled by a good-faith proposal to eliminate all subsidies for fossil fuels AND renewables, renewable energy competition will have a much better chance to win the energy supply race.
Solar-energy-generation costs, for example, fall around 8% each year as technologies improve and capacity expands. Imagine how much faster the gap could close if the fossil fuel competition wasn't on government-prescribed steroids, i.e., shameful corporate welfare largesse.
The fossil fuel PR hustlers claim that the elimination, or even reduction, of its unnecessary federal corporate welfare will cost both production and jobs. This is a shameful lie. U.S. oil companies drill domestically for one reason: Their product can be found here. And that will continue as long as there is local supply and global demand.
What the fat and lazy oil companies truly fear is competitive innovation – and the inevitable loss of market share. So rather than try to outsmart and out-innovate the renewable upstarts, the oil companies spend their time trying to scare US citizens with bogus economic threats while trying to instill the false belief that they exemplify energy supremacy.
A few weeks ago when the big oil CEOs appeared at another one of those meaningless sham DC hearings, the ConocoPhillips CEO James Mulva said that a Senate proposal to end $4 billion of oil subsidies was "un-American." So apparently Mr. Mulva must be “patriotic” since he flew to the hearing in his private jet while earning millions of dollars a year during a time when we have 10% unemployment and the average American is struggling to afford $4.00 a gallon gasoline.
Isn’t it time the mindless fiscal conservatives stop defending wasteful corporate welfare in the name of some stubborn distorted view of free markets capitalism? By the way, the big oil corporate welfare comes from your tax dollars.
14 comments:
Why does government (on any level) subsidize oil companies, ethanol, land developers, bankrupt too-big-to-fail businesses, failing investment banks, and other concerns? Oil companies are making obscene profits; ethanol uses more energy to make than the energy it provides; land developers get free loans (in the form of taypayer-paid bonds they can issue); etc.
Joe Blow, who wants to start an auto repair shop, doesn't get a break from government to open business. Coal miners (whose working years are numbered because many of them contract black lung) don't get to use income averaging to spread their taxable income over several years as athletes and movie stars do.
The difference in these examples is
that one group already has money and influence with legislators, and the other group does not.
If you truly believe in "free market enterprise," you logically would believe that the world of business should be played on a level playing field - not on a field in which some people get subsidies and tax breaks and others do not.
Yes, end the oil depletion allowances for oil companies. They are making multi-billions of dollars per quarter. It will be some time yet before oil is gone, and by that time the companies will have switched to dealing in other energy sources (geothermal, solar, wind, etc.) -- or maybe even in water, "the new oil." But at the rate the world's population is growing, water may run out before oil does. Big oil is using a huge amount of water in its
"fracking" processes.
Barbara said... "If you truly believe in "free market enterprise," you logically would believe that the world of business should be played on a level playing field - not on a field in which some people get subsidies and tax breaks and others do not."
Barbara, I do believe in the American Free Market System! It has served us well for hundreds of years, especially in Texas. All industries benefit from some government subsidies, Banking, Farming, Mining, Lumber, Dairy, and even Wildlife Management. Even Families enjoy subsidies when they purchase a home in the form of Tax Exemptions and other incentives. That also benefits the Banking and Mortgage industries.
Is it fair? Of course not, when you seek a level playing field in dealing with of our quasi-elected Government. How did this come to be? The real problem is that the Government takes our wealth away and then doles it out as they see fit. They shouldn't have our money in the first place! The constant danger of an evolved system such as ours is that it is only a step away from Socialist or Totalitarian System, or both. You seek fairness when you should be seeking a " Fair Tax" .
With the present administration's apparent disdain for business and love of Taxes and controlling our lives we are in for a very bumpy ride as the economy continues to fail, pushing us toward something we will all hate. Don't fall for their for the propaganda.
Anonymous 1 says:
"The real problem is that the Government takes our wealth away and then doles it out as they see fit. They shouldn't have our money in the first place!"
I agree with Anonymous. Since the goverment is controlled by the elite corporatist politicians, mainly in the Republican Party but more and more in the Democratic Party, our tax money gets inappropriately used to benefit the rich and the big money private interests much more than the small business sector and the needy and disadvantaged.
Of course that is not what Anonymous 1 is willing to admit; but his outrage is accurate, even though his interpretation of the problem is mindless pro-free markets nonsense.
Like Anonymous 1, right wing victims of our dysfunctional corporate welfare economy can only blame government. To honestly blame the aborted free markets system they believe so strongly in is just too hard for them.
In the end, most right wingers are simply not smart enough to see the difference between the elite corporate sector - with their prostituted corrupt politicians who run the fed and state governments - and the decentralized small business sector of the US ecomony that government should be protecting and supporting.
And until they do see the difference, America is doomed to continue its decent into corporate fascism.
Hence, Anonymous 1 and his or her erroneous belief system is adding to the problem, and not contributing to the solution.
Tax abatements are another form of business discrimination practiced by states (Texas is surely near the top), counties, and cities. Tax abatements are lures to bring large businesses to an area. Tax abatements mean that the business will pay no property taxes for a certain period of time - often as long as 30 years. Sometimes other gifts are thrown into the mix - outright gifts of cash to the business or allowing it to keep all or part of the local sales tax it collects.
This tax abatement scheme is unfair to similar businesses already located in the city, and often drives the smaller ones to bankruptcy. The small owners pay their fair share of property taxes and do not keep any sales tax, and can't compete with the big newcomer who is subsidized by the city fathers (unlevel playing field).
The Chamber of Commerce -- and often the City Council -- will say, "Oh, but Mr. Big Guy will bring jobs to our town!" By now you know the story on that ruse:
1. Big Guy doesn't bring enough new jobs to pay for the new schools, teachers, and roads that the city will have to provide for him;
2. The city will receive no property or sales tax to help pay for the new infrastructure (meaning that people already living there have to pay higher property taxes); and,
3. All the good jobs will go to corporate people brought in from headquarters.
Barbara (who I never remember meeting in person) and I have been called "racist" in a previous comment section (by someone not willing to see the truth) and now with our latest comments in this section, probably anti-business socialists next.
But if the right wing readers don't want to pigeon hole us in their mindless information prism, you can see that we are both much more fiscal conservative than most of you so-called fiscal conservatives are.
We support small business free markets over the wired and corrupt big business scams that permeate our state and national economies, and increasingly at the local level as well.
Tim Pawlenty, one of the many dud 2012 Republican Party presidential candidates, recently said all taxes for corporations should be eliminated, to supposedly stimulate the economy.
This goes to show how corrupt and stupid these Republicans are.
I say abolish all taxes for all profits for every sole proprietor and partnership in the nation - AND tax all corporate profits at 20%, no exception and no offshore shelters, plain and simple.
Any Republican worth his philosophical integrity would do the same. But they won't, because they have no real concern for local owned small businesses and local economies (except for votes of course).
I look forward to meeting you someday, Barbara.
Btw, the 20% tax rate for corporations I suggest would only apply if they got 1) no tax abatements, 2) no corporate welfare, and 3) no help from the federal government in the form of bailouts or military help if their property were nationalized in so-called unfriendly countries.
If any of the three conditions apply, these corporations would pay the current 35% tax rate until OUR taxes were paid back in full.
Real free-market proponents DO call for the end of corporate welfare. The problem is that there are few real free-market proponents in the Republican Party, and even fewer in the Democratic Party. Both caved to the Big Money long ago.
The U.S. has become a command economy directed by plutocrats, and if we allow this to persist, we'll be poorer for it.
Thank you, Sam, spoken like an intelligent and honest conservative. We also have too few conservatives like you at the local level.
Rocky said... "I say abolish all taxes for all profits for every sole proprietor and partnership in the nation - AND tax all corporate profits at 20%, no exception and no offshore shelters, plain and simple."
Sounds like a great idea, tax the other guy, not me. As it has been said many times, this Populist idea will not work since the Corporations will only raise prices to recoup any "loss" to taxes. We will always be the ones to pay; I really believe it.
I agree with an earlier commenter who said that the "Fair Tax" would be the real solution. From where we sit it appears that the millions that the corporations take in tax-free, is God-Awful. The truth is that we are all subsidized to some extent through tax exemptions for having more children or buying a home, Social Security, and Medicare. It is all a matter of degree and I believe none of it should happen.
You know Rocky; I don't talk about it much but I agree with you about the corporate connection with the war mongering presidents and congresses. I first noticed it back when that evil man, LBJ was running the war in Vietnam as his friends at Bell helicopter and Brown and Root were raking in billions while my buddies lay dying in the mud in those God forsaken rice fields and jungles. We lost that war because we burned out the people's desire for blood as we have all others since but we can't stop it. It is an addiction. The last justifiable war and the only one we actually won since I was born was WWII. All them since were to simply feed the egos of the Presidents including this one, and the insatiable greed of the "Military/Industrial Complex". It seems like I remember one of our Presidents that knew first hand the cost of war, warning us about something like that.
Politicians sell themselves to big business because that's where the money is. They need big bucks to run their campaigns for election and then re-election. They also don't mind the under-the-table cash gifts and golf jaunts and cruise "seminars."
All of the above plays into the need of politicians to promote tax abatement schemes. They need large new businesses to come to town because only such businesses have funds enough to "pay" the politicians. The local mom-and-pop store doesn't have enough money to interest the politicos.
Wow Rocky that was some solid reporting, except for the fact that it looks like you almost completely copied the article out of Fortune Magazine
Last Anomymous, June 10, 11:24 AM is saying that I "plagiarized" Fortune magazine to offer this article to the Roundup.
And yes, I often cut and paste and (to a lesser or greater degree) rewrite articles I agree strongly with. Sometimes I use the factual meat of the articles almost verbatim but I always try to customize the piece with local interest and sentiment.
In the future, so as not to give the impression that I am some faux professional writer, I will make sure I source any article that I am using as a basis for my Roundup submissions. I did that for awhile, but obviously got lazy (or irresponsible) lately
Btw, Anonymous, I am glad you are reading good business journalism that is available in the greater national literature.
At least it is not tweeting my junk to readers.
Richard W. wrote to me:
Rocky said... "I say abolish all taxes for all profits for every sole proprietor and partnership in the nation - AND tax all corporate profits at 20%, no exception and no offshore shelters, plain and simple."
From Richard: "Sounds like a great idea, tax the other guy, not me. As it has been said many times, this Populist idea will not work since the Corporations will only raise prices to recoup any "loss" to taxes. We will always be the ones to pay; I really believe it.
Actually, he is correct. What I did not say was I would only give sole proprietors and small partnerships a two or three year limited tax holiday so the smaller business segment could create real domestic jobs.
What Richard ignores is that if corporations raise prices, we simply boycott those companies and buycott the small local business, since the mass distribution monopolies would no longer be attractive to average consumers.
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