Tuesday, August 3, 2010

The Democrats Exploit A Crisis--As Usual

Last Saturday, I did a comparison of two executives, one a Gulf Coast governor, the other a play President. As to the latter, a little further expansion on his reaction to the BP oil spill is in order, as several of my friends have pointed out. The Obamists always have a plan to deal with a crisis, and most often it has to do with bleeding somebody dry.

Never mind his failure to take any real physical action to prevent, then stop the spill, but it is worthwhile to discuss how Obama and his statist administration have exploited the disaster to advance their agenda of taxing American businesses out of existence. The Euroweenie Democrats now want to change the tax codes on American energy-producers and oil-producers to make sure another major environmental tragedy like the BP oil spill doesn't occur again. It seems to have escaped Obama's notice that the B in BP stands for "British." The corporation which actually caused the oil spill will end up with a massive tax advantage over American corporations which had nothing to do with the spill.

According to Wall Street Journal contributor Joseph R. Mason, the current moratorium instigated at Obama's behest will cost Gulf Coast residents more than 8,000 jobs, $500 million in lost wages, $2.1 billion in related economic activity, and somewhere near $100 million in lost state and local tax revenue. Mr. Mason knows whereof he speaks, both as a scholar and a resident directly affected by the moratorium. He is the Noyse/LBA Chairman of Banking at the Louisiana State University School of Business. The moratorium is temporary, but this administration is so hostile to traditional sources of energy that it wouldn't be surprising to see it extended indefinitely (at least until enough Democrats are turned out in November). Since the moratorium isn't doing enough damage, the Democrats figured they'd claim to be saving Gulf coast residents by adding insult to injury.

In order to punish the oil business while at the same time creating an evermore massive government bureaucracy to interfere with job creation and perpetuation, the Democrats are poised to pass new energy bills which will cost somewhere between $15 billion and $25 billion. That would be on top of the $95 billion and 400,000 jobs which would be lost if the moratorium is made permanent. And how does the boy genius in the White House plan to pay for all this? The usual. Tax the evil corporations--but tax the American corporations in a grossly disadvantageous way in comparison to the taxes on foreign energy producers.

Bear with me, this is a little tricky and slightly wonkish, but it's a major issue. In his proposed 2011 budget proposal to Congress, Obama intends to repeal the "dual capacity" tax credit which allows American corporations to play on a level playing field with foreign corporations. As it currently stands, American corporations with overseas operations receive a deduction on their US taxes which are in direct proportion to the taxes they have actually paid to foreign governments. Clearly, that prevents American corporations from being taxed twice on the same income. This has allowed American corporations to remain competitive.

Under Obama's plan, American energy corporations would pay the outrageous taxes to the foreign nations, then pay them again for the increasingly outrageous American business taxes. It should be noted that American tax law is already askew since the US is the only major nation which taxes foreign revenues, so removing the dual tax credit also removes the American ability to compete.

And as if that's not enough, another deduction would be eliminated, and this time the loss would affect oil and gas companies only. All manufacturing corporations currently benefit from Section 199 of the American Jobs Creation Act of 2004 which allows such corporations to deduct a certain percentage of their domestic production activity annually. The act was designed to allow corporations to reduce their tax burden in order to have sufficient revenue to hire more new employees. Obama may later decide he likes the idea so much that he'll try to eliminate the deduction for all manufacturers. But for now, it's aimed solely at his bete noire, traditional energy producers.

Mr. Mason and The Journal go into greater detail about the pending monetary losses occasioned by such a change in the tax code. For the accountants who read this blog, I suggest you read his entire thesis. But once I hit $75 billion in losses, I started to think that everything beyond that was kicking a dead horse--which is what American oil producers will be at the end of all this. And it isn't just the corporations that will get hurt. The unemployment, taxes and adjunct business losses will be astronomical. But why let human suffering get in the way of a good poke-in-the-eye to big business?

A recent Voter/Consumer Research poll indicates strong opposition to the Obama plan, and much of it grows out of the moratorium. Many of the respondents were not yet aware of the full impact of the concurrent change in the tax codes, but almost all sensed that there is a major tax-and-grab government plan in play.

71% of the respondents oppose any ban on offshore drilling, while 60% oppose a ban on deep water drilling. 88% oppose outright increased government regulation, though 75% want Congress to improve oversight and enforcement of existing laws. 77% said they don't want American corporations taxed twice, and of those, 82% said tax increases will simply be passed on to the consumers, and 81% said further taxation and regulation would make it much more difficult for American energy-producers to compete with foreign companies.

This is all on top of the disdain the respondents felt for Obama's physical response to the BP spill. 42% approved of Obama's handling of the situation, 53% disapproved. As for Congress, 29% approved of Congressional action, 60% disapproved. BP took its hit as well. 29% felt BP acted properly, while 66% felt the opposite. Other oil companies didn't fare much better, getting 34% approval and 40% disapproval.

It's also important to note that while foreign corporations such as BP will benefit all the way around from the Obama plan, they are at least corporations chartered by friendly nations. Also advantaged are highly unfriendly nations such as China and Venezuela. The Obamists don't consider it sufficient that they are assisting foreign corporations which compete with American companies, but are also completely uncaring about the fact that they are assisting America's enemies.

William Ahern at the Tax Foundation summed this up by saying that the elimination of the dual capacity tax credit "is a violation of all normal standards of how to apply the foreign tax credits. Oil companies that pay corporate tax rates abroad that are higher than the corporate tax rates that other firms pay would no longer be able to take credits for the amount they would have paid at the lower tax. . . . If the Congressional proposal is signed into law by President Obama, U.S. oil companies will be paying tax to two countries on the same dollar of income."

Ahern also points to a very strange twist that is being put on this direct attack on American energy-producers. The elimination of the manufacturing dual capacity tax credit for oil producers discussed above would take away that job-creating deduction in the 2004 act designed specifically to "promote all domestic manufacturers." The production of rap music is considered by the Obama administration as being such a huge job-creating business that it qualifies for the credit that oil companies will lose. Somehow, in order to allow the deduction, the Obamists qualify rap artists as "manufacturers." As Ahern aptly puts it, "I guess Congress loves rappers more than roughnecks."

14 comments:

AndrewPrice said...

Gee, what do you know? Obama exploits a disaster to attack American business? At least he's consistent.

Beside that, I don't think he cares about the Gulf coast because he views that as Republican territory. If this spill had happened in Lake Michigan, he would have acted very differently.

LawHawkRFD said...

Andrew: I know, it's hard to imagine a saint like Obama doing anything negative, isn't it? I think he's probably been trying to figure out how he could reward New Orleans and throw the rest of the state to the sharks. And then there's the problem of that dangerous Republican Louisiana governor. Tee hee.

Tennessee Jed said...

I did not find this wonkish at all; a great post, actually. I'll admit I would prefer they open up shallow water drilling, but it is clear Obama's policies are exploitive rather than helpful. Since he is now distraction, I wonder if he and Biden wouldn't agree to step aside now. Samwe with the Dems in Congress.

Well a guy can dream can't he?

LawHawkRFD said...

Tennessee: As we've discussed a few times before, this is likely to end soon with the November elections and the 2012 presidential race. But Obama and his merry band of leftists are doing so much damage that it will take a full two sessions of Congress just to cut into the mess sufficiently to recognize the nation again. I'm just hoping that the Republicans elected this time will have the courage and honor to take Obama,his taxes, his statist legislation, and his deficits face-on with no quarter granted.

HamiltonsGhost said...

Lawhawk--We've come to expect Obama and his socialist friends to tax like never before. He's also found clever ways to impose punitive taxes in the form of personal mandates as well ("must buy" health insurance, anyone?). But this article reveals his other agenda--international egalitarianism. By using the oil spill as a way to show favor to foreign energy companies and disdain for American companies, he has shown his desire to cripple forever the great economic engine that this nation was (and can be again).

LawHawkRFD said...

HamiltonsGhost: Very thoughtful. Obama considers himself a "citizen of the world," and this tax policy proves that America has no more standing with him than Britain, France, China or Burqina-Fasso. It's not exactly treason, but it's not exactly loyalty either.

CalFederalist said...

LawHawk. I figured it out. Upon his involuntary retirement in 2012, Obama wants to be the CEO of British Petroleum.

JB1000 said...

It's...it's like piranha bites. Anyone can survive one bite. And...and...if you can survive one piranha bite, you can survive three or four. There is this...and Obamacare...and the Cap and Trade coming...and the tax code changes... and the damage the deficit has done to the dollar... But if you can survive one piranha bite, you can survive seven or eight... It's not like all the piranha bite at the same time or anything.

I am voting Republican out of Financial Self-Defense.

LawHawkRFD said...

CalFed: No such luck. Even a company that can create and handle an oil spill so incompetently isn't dumb enough to hire somebody as meritless as Obama.

LawHawkRFD said...

JB1000: I never thought of analogizing the Obamists to piranhas (turkey buzzards usually come to my mind), but I like your idea. And what I particularly like is the optimism about the Republican Party and the faith in the resiliency of the American people. I don't doubt that we'll recover, I just wonder how long it will take.

Joel Farnham said...

LawHawk,

You wonker, you.

I am wondering what the United States People would do if they all finally understood just what Obama was up to?

What this all means? I don't know. I do know he aint anybody's friend, even his liberal base.

November can't come soon enough.

I am curious though. Just what mischief can he get into with a Hostile Congress? By the time next January comes around, he should be chastised enough, but will he?

I know the MSM will do it's best, but that influence is waning and those guys know it. Why Chris Matthews almost defended Andrew Breitbart the other day. The great thing about the Internet is that it never forgets.

StanH said...

The thing we all must remember Lawhawk, taxes are a pass through in a business. Though Odumbo will tax the energy companies, invariably, you and I will pay. What were Barry’s exact words, to paraphrase, “energy prices would necessarily skyrocket!” Not just increase a little, but skyrocket…wow!

LawHawkRFD said...

Joel: I think even the dullest of non-political type folks are waking up to the danger. There will be a big change in November, and it's just a matter of how many of them wake up in time for the elections. As for Obama, I'm beginning to think that he is so totally committed to his own brilliance that he will spend the rest of his miserable term whining about the obstructionists in Congress. I just don't see him ever believing that his will and that of the American people could possibly be different from each other.

LawHawkRFD said...

Stan: The increases in costs to the consumer are a simple and obvious pass-through that a surprising number of people simply don't understand. Too many people only count increases in their payroll taxes, income taxes and sales taxes and don't notice that most of that jump from an item that used to cost $2.00 and now costs $4.00 is attributable to pass-throughs. Even today, with the tax rebellion in full swing, far too many people still think of the effect of increased taxes as something that "happens to other people." Eating the rich can give you a fatal case of indigestion.

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