Susan Roesgen: Do you realize that you’re eligible for a $400 credit…
Buried Taxes
When we pay $2.00 a gallon for gasoline, we all realize that a portion of that $2.00 goes to taxes (Federal and State taxes). There are also direct and indirect taxes in that gallon of gas.
If the oil companies are taxed at a higher rate, the additional taxes will be passed along to the consumer.
- Section 199
Section 199 was a tax break for oil companies to encourage domestic production. A repeal of this tax break would be passed along to consumers in addition to forcing oil companies to look offshore (IdahoStatements.com, Kirk Sullivan: Repeal of tax break will cost U.S. jobs, hike energy prices) :
Tucked into the budget is the repeal of tax deductions in Section 199 of the tax code that were implemented in order to boost investment in domestic manufacturing. This "repeal of deductions," which most people recognize as a tax hike, is directed at the energy industry. In essence, the administration is saying, "Let's punish industries that aren't asking for bailouts by raising their taxes."
Even if the effects of this proposed tax increase fell only on these companies, we would all suffer as stocks would likely fall even further. But the fact is that this proposal will hit everyone in multiple ways.
First, this tax increase will hit every American who uses energy - to fill our gas tanks, to heat and cool our homes, even to purchase products such as plastic made from petroleum.
Simply put, it is a tax increase on everyone. Higher taxes on oil and gas manufacturing and production in this country will result in less of it, and that will raise prices.
Second, we would see a loss of jobs to other countries. When the cost to create jobs in this country goes up, companies striving to survive in this economy will put those jobs where they will cost the least. New taxes would reduce the number of American jobs.
- Gulf of Mexico
Section 199 isn't the only target. US Treasury secretary attacks oil, gas tax breaks (Reuters India, Mar 5, 2009):
"We don't believe it makes sense to significantly subsidize the production and use of sources of energy (like oil and gas) that are dramatically going to add to our climate change (problem). We don't think that's good economic policy and we think changing those incentives is good for the country," Geithner told the Senate Finance Committee at a hearing on the White House's proposed budget for the 2010 spending year.
The Obama administration's budget would levy an excise tax on oil and natural gas produced in the Gulf of Mexico, raising $5.3 billion in revenue from 2011 to 2019.
The rise in fuel prices last year contributed to the economic downturn and Americans called for more domestic production to reduce our dependence on foreign oil. The response to that call is to increase the taxes on domestic production, forcing the industry to look offshore. In addition, those tax increases will be passed along to consumers in the form of indirect tax increases.
The summary of proposed tax increases on business is (Jake Tapper, Blogs ABC News, Obama's Budget: Almost $1 Trillion in New Taxes Over Next 10 yrs, Starting 2011, February 26, 2009):
$17 billion - Reinstate Superfund taxes
$24 billion - tax carried-interest as income
$5 billion - codify "economic substance doctrine"
$61 billion - repeal LIFO
$210 billion - international enforcement, reform deferral, other tax reform
$4 billion - information reporting for rental payments
$5.3 billion - excise tax on Gulf of Mexico oil and gas
$3.4 billion - repeal expensing of tangible drilling costs
$62 million - repeal deduction for tertiary injectants
$49 million - repeal passive loss exception for working interests in oil and natural gas properties
$13 billion - repeal manufacturing tax deduction for oil and natural gas companies
$1 billion - increase to 7 years geological and geophysical amortization period for independent producers
$882 million - eliminate advanced earned income tax credit
Total: $353 billion/10 years
That $353 billion that will be passed on to consumers represents approximately $1,000 per person ($100 each year).
The above is only the increased taxes on business. In addition to the above (same source):
On people making more than $250,000.
$338 billion - Bush tax cuts expire
$179 billlion - eliminate itemized deduction
$118 billion - capital gains tax hike
Total: $636 billion/10 years
It should not be forgotten that people earning more than $250,000 spend their money. For those making more than $250,000, it will represent a loss of buying power. They're also owners of businesses who will be forced to lay off workers, cut production or services, or raise their prices. The $636 billion represents $180 per person, per year.
All of the above are before we consider the impacts of the proposed cap and trade (considered a dead horse), the changes at the EPA (H/T Instapundit) or socialized medicine.
So far I've described $280 per person in indirect taxes or loss of buying power, but we still have $120 remaining of the $400 tax cut (for those earning under $250,000). Next we need to consider how that $120 stand up against the impacts of all these increases and deficit spending.
Inflation
From Andy Kessler (The Weekly Standard, Putting the Toothpaste Back into the Tube, 04/27/2009):
The Fed has been cranking money out like water over Niagara Falls. The monetary base has increased by a trillion dollars in just the last six months. And he's not done, furiously printing dollars (bank credits, really) and buying Treasuries in an attempt to flood the economy with dollars. When will it end? $3 trillion? $4 trillion? And then what? A functioning economy doesn't need all that cash sloshing around. Is runaway inflation our next crisis?
Printing that much money is a foolproof recipe for hyperinflation, at a level not seen since the Carter Administration.
Summary
Americans are smart enough to know that wasteful spending on blue collar welfare projects leads to higher unemployment in the private sector, increased direct and indirect taxation, and hyperinflation. They're not dumb enough to be appeased with a "$400 tax credit."
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