Oil Companies, The Price Of Oil & Social Welfare

We hear a great deal these days about the problems with the welfare programs that the state and federal governments offer to the citizens of this nation. To be fair, I am not just talking about the food stamp programs or direct cash subsidies to those without work, but I am also talking about the subsidy programs for those corporations that provide us with the necessities and luxuries in life. So let’s take a moment to discuss one type of welfare that we have in this nation and what should we do about it.

First, we have a spending problem in this nation. Yes, you can argue that one group or another is not paying their fair share, but no one can argue that we are collecting more money in taxes each year in the United States than any nation has ever collected in the history of mankind. So if we are collecting so much money and everyone is paying his share, why do we have such a large deficit? Simply said, we are spending too much and do not have the appetite to stop. Furthermore, as long as people are willing to hand us money, (or allow us to print it), we will not have the courage or the fortitude to stop. Despite this reckless spending, there are those who understand the problems that the deficits are causing and are willing to offer solutions. One of those solutions is that of welfare reform or in other words, cut the tax breaks that we give corporations to operate within the borders of our nation.

When people hear of corporate welfare, they automatically think of checks being cut using our tax dollars to feather the nests of the rich executives of our largest companies. In truth, more often the welfare that the corporations receive is in the form of additional lines in the tax code. Such lines are often inserted within the cumbersome bills that the United States Congress creates and the President later signs into law. These lines are often simple statements that create new deductions where none previously existed One such deduction is the one created for the nations oil companies. The deduction, one of the nation’s oldest for oil companies, allows for a 15% flat reduction of any revenues from an eligible oil well. This tax deduction was designed to allow for the depletion of reserves and creates a larger tax write off than the actual cost of the well. Sounds like a terrible deal doesn’t it? The truth of the matter, virtually all of the “special” tax breaks included in the tax code are just as foul.

So why are these tax breaks or corporate welfare deductions allowed? Simply said, it is because of votes and campaign cash. Each and every politician needs two essential ingredients in order to survive and continue being elected to office. First, they need cash and lots of it. Without cash, they cannot campaign and thus will never get a chance to enter office. The cash often comes in the form of donations to the party, political action committees or directly to the candidate from a multitude of corporations and businesses. Yes, individuals do contribute, but the amounts they provide are dwarfed by the amounts that the nation’s companies provide. In return, these same companies expect face time with the newly elected politician in order to lobby for their special tax breaks.

So how do we resolve this problem with our tax code or corporate welfare? The solution is simple, but the execution would be painful. You begin at one end of the tax code and begin to remove each and every tax break that it contains for the nations companies. Once you have done that, no longer could anyone ever complain that the nation’s corporations were getting “welfare” from the government. The painful aspect of the matter would be the large level of unemployment that the nation would then experience, pensions would lose their values, and stocks would plummet as the nations investors ran to the nearest safe haven outside of our borders. Yet, you could proudly stand tall and declare to all within earshot, that we don’t allow for corporate welfare in this nation.

Stupid huh? Yet that is the solution many are suggesting. Drop this tax break to punish that company for doing well or create a new one to “level the playing field”. The truth of the matter is that there are a number of stupid tax breaks and it will take much better men and women that we currently have in our nation’s capital to correct this problem. For we will need to eliminate these deductions at some point, for without simplification of our nation’s tax code, we will never ever be able to separate the wheat from the chaff in our tax code. For failure to correct this problem with lead us into an economic nightmare that none of us ever want to experience.

Enjoy!