Created on Thursday, 05 June 2008 07:00
Last Updated on Thursday, 05 June 2008 07:00
By Gene Bifano
Three weeks ago Senator Bernie Sanders wrote a piece in The Valley Reporter attacking "Big" oil, Exxon-Mobil and looking for support to take more of their money.
He talks about "excess profits and the Enron Loop Hole." So let's review his proposals.
The Enron Loophole signed into law by President George Bush in 2000 basically frees energy traders of normal regulatory oversight. This truly was dumb as was de-regulating both the energy and phone industries. So I agree we should place theses traders, as well as Hedge funds, under normal regulatory controls. The issue is not profits or capitalism which has made our country great -- it is unscrupulous greed that we need protection from.
As for the excess profits tax, I ask what are excess profits? Something Bernie thinks is in excess? Is it 50 percent return on investment (ROI)? Is it $1 billion in profit? If Bernie wants to use ROI or return on expense then there are many more companies in the U.S. that have a higher ROI then Exxon-Mobil, who also earn billions.
Is it companies that don't invest nearly as much in their business or stockholders as Exxon does? Is it Google that earned over $8 billon last year? Or bottled water companies that charge $10/gallon with minimal investment?
Or maybe he's talking about sports figures or Hollywood types that make hundreds of million of dollars with little or no capital investment. If this isn't excess profits, what is?
Or, do you think he's thinking about the homeowner that buys his home for $250,000 and sells if 30 years later for $550,000 earning $300,000 or 80 percent profit?
Do you think he's referring to companies that don't reinvest 40 to 50 percent of their profits into their business to keep it going?
Another question is what is the government going to do with the money they take above and beyond the current tax structure? Give it away as earmarks to pet constituents? Put it into highway? Add it to the billions of dollars the government is already spending in alternative energy ideas?
Some facts about Exxon-Mobil extracted from its FCC filings. One, they pay taxes at 44 percent tax rate which if I understand correctly is over $100 billion paid in taxes. Two, they employ over 120,000 people who get good medical benefits and retirement plans. Three, they pay its owners (stockholders), union funds, American retirement funds and investors billions of dollars every year. Four, it reinvests more then 30 percent of its remaining profits back into their company.
So if Bernie wants to take even more of their profits over the $100 billion, who would he be taking money from? The medical or retirement funds of Bernie's beloved workers, reinvestment in the company, or stockholders, or all three?
One other question, when Bennie wants to take money from the oil companies, which of the 120 American oil companies is he referring to?
What "Commissar" Bernie is proposing is very dangerous. He may start with "big" oil but where would it go from there? Homeowners, sports and Hollywood types, farmers?
Why is it dangerous? Well anytime the government figures out a way to attack a particular group, they wind up attacking others with unintended consequences; par ex Act 60/68. Here the government, Vermont's, thought it would attack out-of-staters that couldn't fight back; however, they wound up putting small businesses and farms out of business, helped stifle new business and drove many Vermonters out of the state. Brilliant!
How about the Alternative Minimum Tax enacted over 40 years ago? Congress wanted to go after only 155 rich families that weren't paying congress's concept of their fair share of tax. These people were legally operating within the tax code taking whatever deductions that were available; it was intended for rich investors.
However, the unintended consequence is that today millions of middle class people are paying the AMT. Plain ole middle class Americans taking deduction for their high state taxes, their mortgages, kids' education and perhaps their "legal" business expense. So even though these people are reducing their federal tax burden, based on legal expenses the code allows, the AMT says: So what, we want more. This is placing a huge additional financial burden on just plain ole Americans. This problem could have been remedied by simply fixing the tax code.
Can you imagine what the Excess Profit tax will do to us, if passed? Can you imagine there would be the Congressional Office of Excess Profits drawn along the lines of the Spanish Inquisitions, something that would cost hundreds of millions to run? And, over time, no business or individual would be safe.
Bifano lives in Warren.