A Profitable Lesson

To those like Muirduck who believe that EEEVIL oil companies own the government:

Exxon's second quarter profit was $11.6 billion. Exxon delivered to governments $32.3 billion in tax revenue. I'd love to know how much more money Exxon spent on accountants and lawyers to make sure they're complying with myriad taxes, and taking advantage of the myriad loopholes? I wonder how much all of this government bureaucracy they supposedly own is adding to the cost of gasoline?

Many Thanks to you all! Especially from such distinguished commentators.

Like the butcher, Brewer, and Baker I have been away--busy visiting the plants, so those who hate me may benefit from my own self interest. Are not markets wonderful? For where else could those who hate each other also succor one another?

Sincerely,

The Albatross

Woohoo!

Two of my favorite contributors show up when we need them most! Welcome back, Albatross and Mesa. :)

To those new to Muirduck: Please note that Muirduck WANTS the government to subsidize GE and Archer Daniels Midland because they're "good" companies, while he calls libertarians hypocrites for being opposed to all government subsidies.

Indeed, welcome back Albatross.

Methinks, continue the tour de force, please….

So nice to see a post from you again, Albatross.

For all those who argue that the oil industry receives subsidies could you please point to where these are? Where are the cheques coming from the Treasury for the oil companies? Where are the provisions of the tax code? If I remember my tax code right there are tax breaks for domestic drilling, which doesn’t affect Big Oil much since they abandoned most U.S. domestic production 30 years ago. These “subsidies” (if deciding to steal less form people is indeed a subsidy) mainly go to smaller oil companies or the mom & pop or petite J.R. Ewings that dominate the domestic oil industry. As for the assertion that U.S. military intervention in the Persian Gulf is some sort of subsidy, this is absolute humbug. Would the oil still flow if the U.S. was not there? Yes. Why invade Iraq for a measly couple of million barrels of oil that we were buying on the cheap anyway? We live in a world market for oil. Embargoes from particular countries are merely symbolic. Does Israel not get oil? Furthermore, if the oil companies were monopolistic (and the big private oil companies control a measly 5 percent of global oil production), then why not let the Mideast go up in flames? Monopoly is about limiting production. Think what the evil oil companies could charge if the Mideast blew up? I no longer work in the oil industry, but I worked in refineries as a teenager. I have an everlasting respect for those I worked with—you know those who sweat and risk injury, so you can hate them and then enjoy the fruits of the petroleum industry that make your lives so much better.

Martin said:

"Your right to anything, including your right to mastery of a parcel of land with well defined boundaries, is essentially equivalent to my obligation to respect the right."

In the same way that you are "obliged" not to kill me so that I might have a right to my life. Any contrary assertion requires you to show that I have no claim to my life or the fruits of my labor. Your burden to prove. Good luck.

muirgeo thinks not paying taxes is a subsidy?

Then my not killing him is givign him life.

My not stealing from him is an act of charity.

Quote from Martin Brock: "The only thing they may not do is organize vast resources for their exclusive use."

Until you come up with some other way of justifying plundering somebody else's wealth through some other esoteric formula.

Its all the same thing. You think people should only have the property that you think they should have. If you don't think they should have it, then you "have no problem compelling them" to do something else with it. Since your favorite mechanism for "compelling" is the state, I think that makes you a fascist.

If you prefer the word "progressive" or some other euphemism, that's fine. Its all the same to me.

& by the way, what right do you have to tax my consumption anyway? Why does an uninvolved third party get to take a cut if two parties peacefully trade?

Now I understand. You don't oppose my mastery over my property, except to the extent that other people have, historically, opposed my mastery.

In other words, you're only as much of a thug as prior thugs, but no more so. It's good to know you're a man of principle.

I use "property" as people have used the word for centuries.

Different people have, for centuries, used a wide variety of definitions for property. You've chosen one. That your choice is the one that relies on authorities to define, & that you base the validity of this particular definition on other people holding this definition, demonstrates to me the origin of your authoritarian impulses to compel people to do as you wish.

& to head off your strawman at the pass: there's a difference between positive & negative obligations. That's why it's not coercive to deny you access to my property.

Under a progressive consumption tax, an individual retains authority over all income that he doesn't personally consume, so if Bill Gates wants to pay no more tax than your or I, that's his prerogative. In this way, decentralized proprietors may withhold authority from state planners of the fascist variety and choose to organize productive resources themselves instead practically without limit. The only thing they may not do is organize vast resources for their exclusive use.

Precisely, how is this system of authority over productive means "fascist"? How are you defining "fascism" so that your assertion is meaningful rather than simply pejorative?

Of course, you'll ignore this question, because you really don't have a clue what fascism was or what classical liberals have advocated instead.

Again, another confession of a fascist.

You don't know the meaning of the word. Somehow, when I advocate a progressive consumption tax, after the fashion of Adam Smith, I become a "fascist" in your bizarre lexicon, though Mussolini never advocated one and did advocate economic organization antithetical to a progressive consumption tax.

Since you wish to compel me to use my property in certain ways, & wish to tax me if I trade any of this property with your progressive consumption tax, I'll have to assume you've redefined "mastery" in some weird way.

I use "property" as people have used the word for centuries. If you believe that mastery over property has ever been unchecked, you need a history lesson.

You wish to compel me not to use a particular parcel of land at all without your consent. That you call this parcel of land "your property" is simply a matter of entitlement. It's just your title for the parcel. The idea that "your property" is some kind of objectively unassailable assertion is the weird and thoroughly ahistorical notion.

Quote from Martin Brock:"I have no problem with essentially compelling people to reinvest profits rather than diverting them to unrelated consumption."

Again, another confession of a fascist.

And to be clear, I do not oppose your mastery over some parcel of land.

Since you wish to compel me to use my property in certain ways, & wish to tax me if I trade any of this property with your progressive consumption tax, I'll have to assume you've redefined "mastery" in some weird way.

Or "oppose".

Or "clear".

I'm going to tell you how much you can pay your employees.

You can try, but I expect markets to do this.

Much better. I have a problem with your CEO conducts his life and how he spends his paycheck and I need to set limits to his lifestyle.

I might or might not have a problem with it, but the approach I favor has nothing to do with the way the company organizes factors or how it pays the CEO. A progressive consumption tax on individuals doesn't constrain corporate compensation at all.

I can see no reason for him to own more than one house in Dallas and that house should not exceed 1,000 feet.

Maybe you don't, but you speak only for yourself here. I know you like choosing the words you rhetorically oppose here, but you really don't.

Anything larger would be unconscionable because it's not what I want.

You haven't constructed a reductio ad absurdum here, because my position doesn't imply your straw man's extreme position at all. I referred to an underwater chateau in the Carribean. I might have referred to Buckingham Palace or a Pyramid for the CEO's burial instead. Regardless, you've simply substituted your own words for mine, but your words are your words regardless.

Right. Just what I said. I'll be defining "most" and "productive enterprise" for you in your widget endeavors.

Law does this sort of thing routinely. Every tax deferred investment necessarily presumes definitions of "investment", "productive enterprise" and similar terms. Any distinction between consumption and investment does. You don't like these distinctions? Are they "morally wrong" or something? You make similar distinctions yourself when you write "your widget endeavors", and "your" in this case doesn't even refer to an individual person. It refers to a corporation, a legal abstraction. What's the difference between "yours" and "mine"? Does God hand down this distinction on stone tablets or something?

"I have no problem with essentially compelling people to reinvest profits rather than diverting them to unrelated consumption."

Right. That's what I wrote, and it doesn't imply any limit on anyone's profit. It's the essence of a progressive consumption tax that I favor, a reform that would dramatically limit central authority over productive means.

Of course I oppose coercion! It's compulsion that I support.

Your talking in circles here. Why don't you calm down and try again.

I'm not going to coerce you into reinvesting profits instead of diverting them to namby pamby consumption, I'm going to compel you to do it. Totally different. Duh!

No. They aren't totally different at all. The words are roughly synonymous. Didn't you know that? I make no secret of my support for particular coercive acts, because I don't pretend nonsensically to be some kind of anarchist opposing all statutory force.

All of your nonsensical rhetorical wordplay is a transparent avoidance. You could discuss the potential benefits or harms of a progressive consumption tax, for example, but you do what you do instead.

Absolutely. Everybody knows that fishing, building property on beaches and harvesting ocean and beach fruit is totally and completely environmentally neutral.

You may believe so, but I certainly don't. I refer explicitly to "competing interests". I nowhere ever suggest fishing or beach front businesses have no environmental impact.

The mere remote possibility that an oil rig 25 miles offshore (or your widget factory, for that matter) might in any way effect a single frond of seaweed (does seaweed have fronds?) is enough to justify stopping such deleterious activity in its tracks - while at the same time bitching that there's not enough of that activity. We are in complete agreement.

No. You're confused. I don't agree with your moronic straw man at all, even if you do.

The company's "profit" doesn't include my wage or bonus by definition,

No, you're correct that CEOs are not paid from profit (except the bonus is usually tied to profit - we agree this not the main point). Right. Correction: I'm going to tell you how much you can pay your employees. Much better. I have a problem with your CEO conducts his life and how he spends his paycheck and I need to set limits to his lifestyle. I can see no reason for him to own more than one house in Dallas and that house should not exceed 1,000 feet. Anything larger would be unconscionable because it's not what I want.

Right. I'm not saying that oil profits must be reinvested in oil production, but I want most of the marginal value of corporate capital reinvested in some productive enterprise.

Right. Just what I said. I'll be defining "most" and "productive enterprise" for you in your widget endeavors.

but I'm not telling anyone how much profit they're allowed. I'm not even telling anyone how to reinvest profits, but profit is routinely reinvested. I have no problem with profits distributed to shareholders as dividends and then reinvested however the shareholders like.

Of course! I'm not telling you how much profit you're allowed either or what to do with it. Let me repeat myself: "I have no problem with essentially compelling people to reinvest profits rather than diverting them to unrelated consumption."

Oh, hang on. That was you who said that. Sorry. I guess great minds think alike then, eh?

You don't oppose coercion generally, so the generalization is facile.

Of course I oppose coercion! It's compulsion that I support. I'm not going to coerce you into reinvesting profits instead of diverting them to namby pamby consumption, I'm going to compel you to do it. Totally different. Duh!

...environmental concerns are hardly irrelevant. Fishermen, people with commercial beach property, not to mention people generally who enjoy the fruit of clean oceans and beaches, have legitimate interests that warrant consideration.

Absolutely. Everybody knows that fishing, building property on beaches and harvesting ocean and beach fruit is totally and completely environmentally neutral. The mere remote possibility that an oil rig 25 miles offshore (or your widget factory, for that matter) might in any way effect a single frond of seaweed (does seaweed have fronds?) is enough to justify stopping such deleterious activity in its tracks - while at the same time bitching that there's not enough of that activity. We are in complete agreement.

http://www.livescience.com/environment/080625-oil-drilling.html

And to be clear, I do not oppose your mastery over some parcel of land.

Ok, I'll bite. Martinduck - what is the proper ratio between rights and responsibilities?

The question is impossibly vague. Why don't you ask a more specific question?

Your right to anything, including your right to mastery of a parcel of land with well defined boundaries, is essentially equivalent to my obligation to respect the right. In fact, this individual right of yours is an obligation of everyone else. How could the one possibly exist without the other?

What's the "ratio"? If your right to mastery over a parcel of land is one thing, and my obligation to respect your mastery is one more thing, then the ratio of right to responsibility is roughly one to six billion, because everyone else on Earth must respect your mastery as well.

Ok, I'll bite. Martinduck - what is the proper ratio between rights and responsibilities?

If you own a widget company and you pay yourself out of the profit of that company, that's a problem.

The company's "profit" doesn't include my wage or bonus by definition, but I'm not parsing this point. I'd have a problem with the billion dollar bonus spent on the underwater Carribean chateau regardless of how it's labeled.

If you reinvest the entire profit into new widget making, then that's what I want.

Right. I'm not saying that oil profits must be reinvested in oil production, but I want most of the marginal value of corporate capital reinvested in some productive enterprise.

I'm merely a customer of yours, but I'm going to tell you how to run your business and how much profit you are allowed.

You may tell anyone anything you like, but I'm not telling anyone how much profit they're allowed. I'm not even telling anyone how to reinvest profits, but profit is routinely reinvested. I have no problem with profits distributed to shareholders as dividends and then reinvested however the shareholders like. That's the whole point of the progressive consumption tax that I favor.

I have no problem compelling you to do my bidding. anything else is unconscionable.

Your personal sense of conscience isn't very persuasive to me. We all have one of those. You don't oppose coercion generally, so the generalization is facile. Property rights generally are compulsory, and I often favor them, but rights are not neatly separable from obligations.

Oh, and while I'm at it, I'm also going to prevent you from building more widget factories (You know, what with the environment and all) while simultaneously making my re-investment demand. Makes perfect sense.

You can do that all you like, but I wouldn't; however, environmental concerns are hardly irrelevant. Fishermen, people with commercial beach property, not to mention people generally who enjoy the fruit of clean oceans and beaches, have legitimate interests that warrant consideration. An offshore oil drilling rig poses substantial risk of environmental damage as a matter of fact. Other interests potentially harmed by this damage have every reason to raise the issue and to expect consideration of their competing interests. Oil drillers hardly the only interests with considerable rights involved. They aren't even the only commercial interests.

Crusader,

And imagine some the margins' of profits at my greedy local mall!!

Oil companies make roughly 8 cents on a gallon gas sold (not on a dollar a gallon). - Rudy

Don't dazzle me with science! The point is they make a profit and we all know that profit means the capitalist parasites have once again been feasting on the blood and pain of the workers and the consumers and it must be stopped. The only capitalists immune to my outrage are Warren Buffet and George Soros because they are on the virtuous side of all issues. That's what they say.

(better, Crusader. No?)

Rudy - but oil is more of a necessity then cola. After all you need to fill up the gas tank so you can ride to the strip mall to partake on American crass commercialism.

Methinks - you don't get it! You have to let the hate FLOW through you! Like the dark side! If you don't some capitalist gore on your fangs, you haven't been working hard enough! Where are some good Russian Bolsheviks when you need them? They knew how to have a good hanging party - you know they say "just drop in!"

Oil companies make roughly 8 cents on a gallon gas sold (not on a dollar a gallon). This, by no means, is a high profit margin. Soda companies and some of the investment companies have profit margins of 20 cents on a dollar. Are some wanting some sort of new federal czar appointment to have oversight on company profit margins?

...of GDP (apologies)

Well many liberals are clamoring for a wealth tax(50%) to be applied every few years as a solution to balancing the budget.

...While at the same time bitching and moaning about the low savings rate in this country. I'm sure the tax revenue will just come flooding in - just like it does in France where the budget deficit has finally been pushed below 3%. Finally.

If the CEO of Exxon-Mobil gives himself a multi-billion dollar bonus this year (or if his board gives it to him) and he spends it on a personal submarine to visit his underwater chateau in the Carribean, I suppose that's a problem, but if the company or its CEO spends the profit on oil exploration or some alternative energy development or some other useful organization of productive resources, why would that bother me? It's exactly what I want

If you own a widget company and you pay yourself out of the profit of that company, that's a problem. If you re-invest the entire profit into new widget making, then that's what I want. I'm merely a customer of yours, but I'm going to tell you how to run your business and how much profit you are allowed. I have no problem compelling you to do my bidding. anything else is unconscionable

Oh, and while I'm at it, I'm also going to prevent you from building more widget factories (You know, what with the environment and all) while simultaneously making my re-investment demand. Makes perfect sense.

Btw, those trying to evade the wealth tax(like in France) should be hunted down and hung with their own capitalist rope like the dirty filthy kulaks they are!

Well many liberals are clamoring for a wealth tax(50%) to be applied every few years as a solution to balancing the budget.

I gotta plead ignorance on this one. Does any corporation or individual need to pay taxes on losses?

Exactly, Speadmaster. Only next time, plead an organized mind instead of ignorance.

I'm still trying to wrap my head around the term, "fascist libertarians!" ;-)

I think windfall profits for oil companies ought to be enacted into law with the same legislation that enacts windfall profits taxes on farmers.

And professional athletes, since they "couldn't" have expected to be the zillion to 1 winner in that lottery.

We should also have a windfall profits tax on movie stars.

We should also have a windfall profits tax on lottery winners.

Wait, lottery winners? Doesn't that defeat the purpose of the lottery? Wouldn't that discourage people from playing the lottery in the first place?

Yes, yes it would end lotteries as we know it. At the same time, if applied to lottery-like industries such as movies, music, sports, oil, agriculture, and all other commoditities which follow boom-bust profiles, then those industries would also cease to exist as we know it, in the US anyway.

It wouldn't stop overseas behavior though, thus transferring economic rent from US persons and US companies to their foreign equivalents.

Taxes are taxing. Increasing them on selected forms of commercial activity makes it much harder to make a profit from those activities, ending a lot of supply.

What happens when you reduce supply, all else being equal? You get higher prices, either explicitly or implicitly in lower quality (such as worse movies when the best actors choose to retire instead of getting paid a fraction of their rightful earnings).

"They were subsidized in years when they were losing money because they were exempt from paying taxes on their losses."

I gotta plead ignorance on this one. Does any corporation or individual need to pay taxes on losses?

If profits are high because prices are high because supply is short relative to demand, we want more investment in expanded supply, and the oil companies are best positioned to make these investments, so high profits are precisely what we want in this scenario. I have no problem with essentially compelling people to reinvest profits rather than diverting them to unrelated consumption.

If the CEO of Exxon-Mobil gives himself a multi-billion dollar bonus this year (or if his board gives it to him) and he spends it on a personal submarine to visit his underwater chateau in the Carribean, I suppose that's a problem, but if the company or its CEO spends the profit on oil exploration or some alternative energy development or some other useful organization of productive resources, why would that bother me? It's exactly what I want.

The arguments for "the bigger the profits the better" would be more convincing if the oil biz was not so cartel like.

muirduck - why are oil companies obliged to develop renewables? Because you said so?

Methinks pretty much eviscerated muirduck. I can't add anything to that.

Murigeo, what about athletes? Their salaries are astronomical, the leagues are monopolies, and the stadiums they play in are heavily subsidized by the taxpayers. Let's rein in the obscene profits they are earning off their playing abilities!

Question: Suppose everyone in the NFL had the same low salary. Would the quality of play get better or worse?

A quick comment on Muirgeo's idea that the companies aren't going to increase their production. As profits in an industry rise, economists don't always expect the established companies to increase their production, because they enjoy the profits. However, onlookers see those profits and enter the market, which will increase supply and decrease prices overall. That is why we will see supply increase and prices decrease.

Don't the oil companies, Exxon in particular, pay billions of dollars in corp. taxes each year?

You're clearly missing the point. They were subsidized in years when they were losing money because they were exempt from paying taxes on their losses. It doesn't matter that Exxon alone paid more in taxes in 2007 than the bottom 50% of individuals combined. What matters is that the bloodsucking capitalist investors were allowed to keep any of that profit. That amounts to another subsidy. And now fascist libertarians like you want to allow them to drill for more oil so they can get more subsidize? Ha! Oh, and Enron is so evil the devil sold his soul to it!

Love,

Muirgeo

"Maybe because they are massively subsidies off the backs of consumers and tax payers."

Yeah, I remember when the oil companies busted in on Congress and forced them at gunpoint to pass laws giving them subsidies.

muirgeo, could you expand on this? "Maybe because they are monopolistic and anti-competitive."

And regarding subsidies or corporate welfare, I'm against them as well. What other subsidies exist other than lowered corporate taxes?

Don't the oil companies, Exxon in particular, pay billions of dollars in corp. taxes each year?

When the government takes away the oil companies' "obscene profits" this hurts me. My ownership of oil company shares (via my retirement portfolio index funds and in the holdings of the insurance companies that provide my life, car, house, and long-term care policies), all help me hedge against the rise in oil prices. Take away the profits and you take away my hedge.

Anyone who objects to the obscene profits subsidies, monopoly power, etc. of the oil companies, is always free to buy oil company shares and then donate their dividends and capital gains to whichever worthy cause they choose, including groups favoring renewable energy, the environment, the poor, etc.

Please: No gratuitous ridicule or name-calling in the comments section.

"Me personally I feel like I'm tilling some one else's field for them when I fill up."

Then don't fill up. (And that should be ok as you're already full of something.)

"Nobody is qualified to determine what is a reasonable or fair profit."

Actually, everyone is qualified ... they're called consumers. If you don't want to buy it boycott or substitute (see cross-elasticity of demand).

Consumers are the ones holding the cards, not politicians. The latter need to stay out.

"What I don't hear is any valid reason why oil companies should not make these profits."

Maybe because they are massively subsidies off the backs of consumers and tax payers. Maybe because they are monopolistic and anti-competitive. End the subsidies. And I mean really end them or provide equivalent subsidies for alternatives. But again the oil companies control our government and just recently won massively in the fight for more subsidies. They KO's renewables.

http://washingtonindependent.com/view/big-oil-subsidies

"And all Iraqi military and civilian personnel should listen carefully to this warning. In any conflict, your fate will depend on your actions. Do not destroy oil wells,...."

George W Bush to the Iraqi people 2 days before his invasion to protect us from the WMD's.

QUESTION to all the finance experts here.

Does anyone really think, considering their current record profits" that the oil industry is anxious to put lots of money into getting increased supplies of their product to the market thus lowering the cost and their profit margin. Do you all really feel like a beneficiary of 'free markets" when you go to fill up and not a schlep with no real other choice? Me personally I feel like I'm tilling some one else's field for them when I fill up.