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Thursday, May 24, 2007

"We're Not the Commonwealth Foundation"

A report from the union-backed, socialist leaning (see note) Pennsylvania Budget & Policy Center calls for enacting the Governor's Proposed Oil Profits Tax, saying it is a good tax because:

1) Oil companies have a lot of money, therefore the state should take some, a la Lenin, Mao, and Hugo Chavez.

2) Oil companies have a higher profit to sales rating than Wal-Mart (though retail tends to have low margins, where financial companies have profit margins about 5 times that of oil companies) and have a higher profit to owners' equity rating than Microsoft and Boeing. I'm not sure if that means Exxon and others are undervalued, or whether it is due to Microsoft having no debt and billions in cash reserves while Boeing not being tremendously profitable - but it really has no bearing on the appropriateness of higher taxes.

Of course the neo-Marxists want everyone to believe that the profits, and high gas prices, are because oil companies are greedy. Apparently much greedier than they were 4 years ago, when they weren't so profitable and gas prices were lower. They also seem to get greedy every summer and whenever a pipeline in the Middle East is damaged - when they raise gas prices.

3) The oil company profits tax would be passed on to individuals - but no so much buyers at the pump, or employees, but the rich, evil shareholders. Of course, no mention that oil companies are large parts of many worker's pensions and 401k plans - including being prominent investments in the PSERS plan. In other words, this tax would merely be passed on to school teachers.

4) Oil companies don't invest "enough" in capital, infratstructure, and research on alternative sources - "only" $14 billion in the US alone last year.

5) Oil companies skip out of paying Pennsylvania taxes. The report acknowledges that oil companies pay record taxes on their profits, but claim not enough is paid to Pennylvania's Corporate Net Income Tax.

The report claims that oil companies are practicing creative accounting to avoid taxes in a "high tax state such as Pennsylvania". They estimate based on sales of 4 companies (extended to all oil companies) that oil companies are only paying between 40 to 74% of their "fair share" of a tax they state is high. Yet to justify the Oil Profits Tax, oil companies would have to be paying only 9% of their "fair share." The Oil Profits Tax would generate 11 times the revenue oil companies currenlty on the CNIT, and represents between 4 and 8 times what the report argues oil companies should pay on an already high tax.

Note: In a related story in the Tribune Review Brad Bumsted tries to find an appropriate label for the socialist-leaning Pennsylvania Budget & Policy Center:

Asked whether it could be described as a liberal/progressive group, Ward said, "we are not the Commonwealth Foundation."

You can say that again.

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