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Sunday, September 14, 2008

Big Oil and Taxes: Palin Vs. Obama

Several folks, most of them in the MSM, have pointed out that Sarah Palin did in Alaska what Barack Obama wants to do in all of America with regard to taxing the oil companies. Is this so? Let's examine the issue.

Obama's windfall profits tax. Barack Obama wants to set a windfall profits tax on oil companies.

Democratic presidential candidate Barack Obama said on Monday he would impose a windfall profits tax on U.S. oil companies as he sought political gain from Americans' pain over high gasoline prices.

Launching a two-week focus on the economy after clinching the Democratic presidential nomination, Obama drew a sharp contrast between his economic policies and those of John McCain, his Republican rival in the November election.

"I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.

There are three things that are vital to understand about this so called "windfall profits" tax. First, this tax would only be imposed on oil companies. Second, it would only be imposed on profits are too high, and this number is not set yet. That means if oil companies, and oil companies ONLY, make more than a certain amount then they pay more in corporate taxes than any other company. Second, those taxes will be refuned only to folks that Barack Obama considers the middle class.

To me at least, Obama's windfall profit's tax is standard issue class warfare. He is punishing those that are doing well and rewarding those that aren't doing as well.

Palin's oil profits tax

With regard to the tax that Sarah Palin imposed on oil companies, in her case, she raised the tax on profits from 22.5% to 25%.

The basic elements of the Palin tax proposal, called Alaska's Clear and Equitable Share, are:

• 25 percent tax on net profits, or the value of the oil minus operating expenses and pipeline and tanker charges. That compares with the 22.5 percent Petroleum Profits Tax passed in 2006. The tax rate rises when oil prices are high.

• Protection when oil prices are low. The big fields of Kuparuk and Prudhoe Bay would pay at least a 10 percent gross tax on the oil's value. This tax on the gross -- before operating expenses are deducted -- would be instead of a tax on net profits, not in addition to it.

• Changes in allowable tax credits and deductions. Producers no longer could write off the cost of replacing deteriorating pipelines.

• Higher salaries for oil tax auditors.

In Alaska, the oil companies face a special tax that no other businesses face, but there is a reason for that. They are using the resources, the oil, of Alaska. Because they exploit resources of Alaska that no other companies exploit, they face a tax no other companies will pay. First, this is not a new tax. This tax has been in place for a long time. Palin looked at the manner in which the tax was negotiated and she felt that not only was it negotiated in secrecy but that it didn't give as good a deal to the people of Alaska as it should have. As such, she re negotiated the tax and raised on the oil companies. Let's remember that as Governor of Alaska, she is responsible for the best interest of the people of Alaska. (not the oil companies) Then, she sent a check of $1200 to every citizen of Alaska.

Here are the differences in the taxes. Firs, Palin's tax taxes all profits not only those that are too high as Barack Obama wants. Second, the revenue raised went to all the folks that Palin represents, as opposed to Obama's, which would only give money to people who didn't make enough money. Third, Sarah Palin didn't create a new tax. She simply re negotiated a tax she thought wasn't giving as good a deal to the people she represents. Barack Obama wants to create a whole new tax on a nebulous concept of "windfall profits".

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