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Old 05-06-2012, 03:30 PM   #43
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Well said Senior Chief.

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Old 05-06-2012, 03:51 PM   #44
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Excuse me? Depletion Allowance write-offs? It's a sizable tax break. They had an important role many decades ago, but no longer. I think your response is a little harsh, Chief.... but, you're not alone in this.

I'm confused by what you're trying to say. The depletion allowance, like depreciation, is a form of cost recovery for capital investments.

Is depreciation for capital equipment something that "had an important role many decades ago, but no longer" as well?

Perhaps if a person hasn't actually run a business, one may not realize that a large number of costs relating to running that business are written off as "tax breaks".

If as a cheese manufacturer, I spend $1000 for a machine to help me make cheese, each year I can recover part of that purchase price (the machine becomes less valuable as I use it)- that's depreciation.

If, as an oil company, I spend $1000 on an oil lease, each year I can recover part of the value of the oil I pumped out (the well is less valuable after I remove oil)- that's depletion.

These tax write-offs are naturally important to industry- do you advocate letting the cheese industry (which makes a greater percentage of profit than oil companies) keep depreciation allowances but force the energy industry give up depletion allowances? What would be your rationale?

Do you believe other manufacturing industries are "subsidized" by depreciation write-offs?
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Old 05-06-2012, 04:04 PM   #45
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I think your response is a little harsh, Chief.... but, you're not alone in this.
I apologize if I seemed harsh. Wouldn't want to hurt anyone's feelings.

Folks seem able to believe some very contradictory things, as long as they feed into the class envy/business hatred/condemn success meme so popular right now.



Here's the thing: I don't love the oil industry, but I do like facts.

Bumpy, inconvenient things, aren't they? They don't work as well on a bumper sticker as slogans though... imagine this on the back of your Prius;

"Depreciation allowances are not subsidies- the Child Tax Credit IS a subsidy"

Sounds like an IRS publication.
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Old 05-06-2012, 04:50 PM   #46
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A few days ago an article was printed in the local paper. GM, Ford, and Chrysler paid $0 in income taxes to the federal government for 2011. They were allowed to use losses from the previous year and in GM's case,losses of the bankruptcy from last year. The GM, Ford, and Chrysler profits from the first quarter of this year were in the billions. I guess the oil companies and other big corporations (GE?) get a lot more write offs that we the average citizens will never see.....And to top it off none are lowering prices.
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Old 05-06-2012, 06:13 PM   #47
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Unspoken in this chat about gasoline and oil prices is the effect of monetary policy on the "price" in dollars, and what actually backs our "quantitatively eased" paper dollars.

When I was a kid, gas generally ran about 25 cents a gallon- paid for with a silver quarter (which is worth about $5.50 in silver today).
When I went to work in 1964 minimum wage was 68 cents per hour gas was 22 cents a gallon. 3 gallons for an hours work. Gas $4.50 a gallon. Minimum wage $7.25 about 1.6 gallons per hours work. Since none us pay for gas with gold, I'd say that's a more accurate comparison
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Old 05-06-2012, 07:33 PM   #48
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Originally Posted by Senior Chief

I apologize if I seemed harsh. Wouldn't want to hurt anyone's feelings.

Folks seem able to believe some very contradictory things, as long as they feed into the class envy/business hatred/condemn success meme so popular right now.

Here's the thing: I don't love the oil industry, but I do like facts.

Bumpy, inconvenient things, aren't they? They don't work as well on a bumper sticker as slogans though... imagine this on the back of your Prius;

"Depreciation allowances are not subsidies- the Child Tax Credit IS a subsidy"

Sounds like an IRS publication.

Why let facts get in the way of a perfectly good rant?
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Old 05-06-2012, 08:56 PM   #49
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Depreciation and depletion write offs are not the same animals. Oil is not a capital asset in the same way as the drilling rig that extracts it from the ground. The oil companies depreciate all their capital investments, like equipment, trucks, etc., just like other companies and industries. But no one else gets a depletion allowance. Why is that? Special treatment?

Depletion write-downs, as I said earlier, were probably a good thing - originally. But they were based on the idea that known oil reserves would be depleted in a matter of years. Since then, not only have they NOT been depleted, but those reserves have ballooned beyond anyone's expectations.

However, that's not what I took issue with. Your argument was that Big Oil doesn't get any tax breaks. I say they do. I'm not saying they shouldn't get some breaks, hell everybody does, right? Even me, even you. All I said was that they get tax breaks. And, personally, I think the "special treatment' of depletion allowances is a bit outdated. My opinion, and I have a right to it. And yes, I think your comments are a bit harsh.
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Old 05-06-2012, 09:05 PM   #50
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Not entirely true several other businesses get them. mines and rock quarries are just two.
Anything with non- returning assets gets them
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Old 05-06-2012, 09:12 PM   #51
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Well everyone, oil is down to $95 a barrel due to the elections in France and Greece.
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Old 05-06-2012, 09:58 PM   #52
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Not entirely true several other businesses get them. mines and rock quarries are just two.
Anything with non- returning assets gets them
You are correct, also timber companies. All I've been saying is that depletion allowances are tax breaks beyond, and in addition to, depreciation.... And in a VERY healthy and profitable industry, it may be time to take another look. That's all, folks. My 2 cents....
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Old 05-06-2012, 10:59 PM   #53
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You are correct, also timber companies. All I've been saying is that depletion allowances are tax breaks beyond, and in addition to, depreciation.... And in a VERY healthy and profitable industry, it may be time to take another look. That's all, folks. My 2 cents....
Oil leases, timber stands and and gravel pits are capital assets that lose value as the "whatever" is extracted.

Why should these capital assets be treated in a completely different way than other capital assets? Because the industry as a whole is profitable? Because you think gasoline costs too much?
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Old 05-06-2012, 11:04 PM   #54
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When I went to work in 1964 minimum wage was 68 cents per hour gas was 22 cents a gallon. 3 gallons for an hours work. Gas $4.50 a gallon. Minimum wage $7.25 about 1.6 gallons per hours work. Since none us pay for gas with gold, I'd say that's a more accurate comparison

The Federal minimum wage in 1964 was $1.25/hour, which is what I made at my first "real" job. It bought at least 5 gallons of gas, up to 10 gallons when we had price wars.

I'm not disputing that you made 62 cents an hour, just that it was not actually the minimum wage.
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Old 05-07-2012, 12:04 AM   #55
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Too much for me, I'll unsubscribe from this thread....
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Old 05-07-2012, 05:00 AM   #56
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You don't see much in the media about profit margins...



Oil Company Income Versus Other Industries


The graphic shows the most recent data available on the profit margins of various major industries for 2011. During this period, the profit margin of U.S. oil and gas companies (6.7 cents per sales dollar) was below the average profit margin for all manufacturing industries (9.2 cents per sales dollar). Industry classes ranking well above oil and gas companies included beverages/tobacco, computers/peripherals and pharmaceuticals/medicines.
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Profit Dollars at Work

Oil company profits are used primarily for two purposes: to pay dividends to shareholders in the business and to pay for capital investments to find, produce, process and transport energy products to consumers. From time to time, oil companies also may use available cash to pay down debt and to buy back shares of their stock to help enhance its value for investors.

Shareholder Dividends. Millions of Americans own stock in oil companies either directly as shareholders, as owners of mutual fund shares or as participants in pension fund and other retirement accounts. Each year, dividends paid by oil companies put hundreds of millions of dollars into the hands of the public.
Thank you for posting this little known fact. Very few people understand the difference between profit and profit margin. You tell me why the media touts "big profits" by the oil companies but doesn't give the comparison between them and other profitable companies.... Hmmm...
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