What Congress Wants
[Guest post by DRJ]
The second effort at bailout legislation passed in part because of the “sweeteners” the Senate added. One such sweetener was an extension of tax cuts for businesses, with the exception of the oil and gas industry. Here’s a comparison of what Congress thinks is important to American consumers:
Houston Chronicle: “Oil, Gas Firms Face Tax Increase.”
“The massive financial bailout package approved by the House on Friday and quickly signed by the president blocks oil and gas companies from enjoying nearly $5 billion in anticipated tax cuts, while raising nearly $4 billion more in new taxes to help fund tax breaks for renewable energy.
An oil industry representative expressed disappointment.
“Our views on increased taxes on the industry, whether they’re part of the bailout or some other legislation, remain unchanged,” said Bill Bush, a spokesman for the Washington-based American Petroleum Institute, an industry trade group.
“Additional taxes discourage increased investment in energy production, and that moves us in the wrong direction and could ultimately hurt consumers,” Bush added.
The legislation freezes the tax deduction oil and gas companies receive for their domestic manufacturing operations at 6 percent, while other American manufacturers will see that deduction rise to 9 percent in 2010.
That provision will raise $4.9 billion over 10 years.”
Hollywood Variety: “Hollywood gets bailout break — Tax credit sneaks into Friday’s approved bill.”
“The legislation, originally enacted in 2004 in an effort to stem runaway production, extends and expands an existing federal domestic production tax credit that had been set to expire at the end of this year. The credit was also modified to allow the incentive to be applied as an immediate deduction of the first $15 million spent on any film or TV program produced in the United States.
Previously, the incentive was only available to productions with a total cost of under $15 million. The modification is retroactive to January, allowing many more productions to take advantage of the incentive this year.
The legislation also increases the single-year deduction in production costs, from $15 million to $20 million, that film and TV productions may take if the costs are incurred in designated economically depressed areas.
The incentive was extended through December 2009. The projected cost of the incentive over 10 years is $478 million.
MPAA chief Dan Glickman hailed the legislation as being well timed to keep the film and TV biz working.
“This puts our industry, which employs 1.5 million Americans, on equal footing under the tax code with other leaders of the U.S. economy and will help keep jobs and film production here in the United States,” he said.”
Moral of this story: Saving oil and gas jobs is bad but keeping Hollywood jobs is good. I expect to see more “bad” jobs go away, just what this Democratic-led Congress wants.
— DRJ
I’d like to know why the oil companies are saying this will decrease investment. Won’t it just encourage them to shift their investment to alternative energies, to capture the tax breaks?
They keep spending all this money on advertising trying to convince us that they’re busy investing in alternative energy. Is that true, or not?
Phil (3b1633) — 10/4/2008 @ 10:15 amPhil,
They may diversify in part but they are oil and gas companies and there is plenty of oil and gas in the world. This will encourage them to invest in other nations that welcome their capital and expertise.
Read the Variety article. Would losing tax breaks make movie companies diversify into other entertainment venues like computer games or sporting equipment? No. The Hollywood quote is clear: Tax cuts keep jobs at home. Tax increases send jobs elsewhere.
DRJ (c953ab) — 10/4/2008 @ 10:21 amThe legislation freezes the tax deduction oil and gas companies receive for their domestic manufacturing operations at 6 percent, while other American manufacturers will see that deduction rise to 9 percent in 2010.
Except this isn’t a tax increase, it’s keeping the tax the same, and giving a break to other industries. Since the oil industry is already doing very well in the U.S., I don’t see how they’d decide they can’t afford to continue to do well. At worst, they might suddenly find other areas that are more profitable here because of the tax breaks.
Now, they do say the oil industries “anticipated” the increased tax deduction. If that deduction had actually been promised a while ago, and then companies had incorporated that into their business model, then that would be an increase relative to their expectations. I’d like to know how long this deduction increase was “anticipated” by manufacturing and oil.
Phil (3b1633) — 10/4/2008 @ 10:27 amNote also that there’s a yearly bill that’s known as “The Extenders Bill,” which is a pile of things that get passed without much argument every flipping year. It’s a ploy so congresscritters always have a tax break (or whatever) to talk about when they’re back in their home district.
This year, that same crap bill was what the bailout was attached to. The crap was already in a bill that passed the House once. The Senate amends it with a tiny $700 billion clarification. Then the House ratified it with the bailout attached.
There was some crap added to the crap, but it takes more work to figure out what was added when.
I think a hefty chunk of the tax breaks were in the original non-bailout crap bill though.
Al (b624ac) — 10/4/2008 @ 10:29 amThe moral of this story, the moral of this tale, is that the tax code is the prime mechanism for government to push business and individuals in directions they wouldn’t otherwise be willing to go.
The tax code rewards the compliant and punnishes the disobedient. It is the stick government uses to bend citizens to the will of the oligarchy.
Freedom for Americans is only possible under a tax collection system outside the scope of manipulation by our oppressors.
Ropelight (1be620) — 10/4/2008 @ 10:50 amThat’s our Dubya. I finally figured out how he managed to avoid being impeached by conservatives all this time; he instructed his Democrats and media to attack him constantly with one strawman after another so that conservatives would feel that they needed to defend him. And then he puts this injured expression on his face, especially with his eyes and eyebrows, and that allowed him to destroy the country with his Democrat allies while conservatives felt sorry for him.
J Curtis (3c4f3b) — 10/4/2008 @ 11:08 amRopelight is exactly right; it’s govt using taxes as a carrot & stick ploy in order to do what Phil alluded to: keep developing oil & gas, you get the stick; turn to alternatives, you get the carrot. Never mind that we should be doing both simultaneously; never mind that oil & gas companies are under no legal obligation to branch out into alternative energy sources. Would it be wise for them to do so? YES. Should anyone force them to do it? Not on your life. If they won’t do it there is plenty of room for T. Boone Pickens or some venture capitalists to come along and create a new market.
Why some liberals think that enacting a measure which is guaranteed to stifle a market could possibly be a good thing is truly maddening. It’s as if their ONLY plan for the development of alternative energy is to force the current enrgy producers to convert. The idea of bringing online wholly new companies to produce alternatives is seemingly a concept they cannot come to grips with.
Icy Truth (1468e4) — 10/4/2008 @ 11:18 amBig Oil was excluded for a reason. They will be pushed to raise prices on oil and gas which is exactly what the Dems want to happen.
tmac (f9e092) — 10/4/2008 @ 11:47 am#7, yes, Ice, the reason Lefties want to stifle markets, especially energy production, is the same reason they always want to raise taxes: it will result in the destruction of our economic system. It’s also the same reason Osama bin Ladin attacked the World Trade Center.
Leftist dogma depends on widespread economic and social disruption to bring about the preconditions where America’s middle class will turn to socialist programs to alleviate the suffering. Economic disaster is Leftism’s Holy Grail.
Understand that, and you’ll understand why Dems are always seemingly on the wrong side of issues. It isn’t that they don’t grasp the concepts which would address specific problems, it’s that Dems actively seek to make problems worse.
It’s their modest contribution to the struggle to trick America’s middle class into supporting the Left’s grand vision for a Workers Paradise, with Dems cracking the whip, of course.
Ropelight (1be620) — 10/4/2008 @ 12:05 pmYes votes, contact info and potential challengers over here. Clip and save for November 4th.
Dan (b3ac72) — 10/4/2008 @ 12:07 pmAs if oil and gas companies will actually “pay” those taxes. Joe six-pack, and everyone else, will pay them and any sentient being should understand as much. Just trying to help the little guy, doncha know.
Whereas movies are discretionary dollars. The consumer can opt in or out when it comes to footing Hollywood’s tax bill. Too much freedom, obviously.
A more perfect example of rewarding friends and punishing enemies would be hard to come up with. Nevermind that millions of “enemies”, American citizens, are employed by and pay taxes thanks to the evil oil companies.
Chris (cefe13) — 10/4/2008 @ 12:26 pmRe #9, #9, #9, I omitted the timely example of today’s sub-prime mortgage crisis. Dems knew full well that forcing banks and S&Ls to grant big ticket home loans to people who couldn’t make the monthly payments would result in widespread forclosures which would lead, in turn, to meltdown in the secondary mortgage markets.
All Dems had to do was put a few of their guys in the top spots at Fannie and Freddie, let them loot the bonus program in exchange for overseeing the gross malfeasance, while ACORN did the leg work. Chris Dodd and Barney Frank kept Congress out of the way and kept any pesky legislation designed to provide oversight on hold. The scam also required the fig leaf of an invistightion into wrongdoing and a slap on the wrist for Jim Johnson and Franklin Raines. Presto, they’re off scott free, double jeoprady don’t ya know.
Now all that remained was to start yelling “The Sky is Falling” and GW Bush and the GOP caved-in right after a little charade in the House put on to gull the folks. Slick huh?
Ropelight (1be620) — 10/4/2008 @ 12:30 pmI don’t think the Congress is smart enough to plan anything long term. Their attention span barely reaches the next election. I do think they respond to their contributers. That’s why the ACLU is so left wing. Everyone but the lefties gave up on them. They get their money from far left organizations.
Since 1968, the Democrats’ rules have raised the influence of left wing groups. The teachers’ union stops any attempt to reform education. The SEIU will control any Democrat effort to reform healthcare. That way salaries and work rules will trump efficiency.
To some extent, similar forces influence Republicans. When I got interested in working with the new Republican Congress in 1994 on health care reform, I was told that they were not interested in physicians’ input, even physicians with graduate degrees in health economics. The health plan would be written by tax lawyers. I even spent some time in Washington talking to people about it and gave up. I was at Dartmouth at the time and was willing to spend a year in Washington working for nothing if I could help.
The difference is that the Republican party now is heavily influenced by small business groups and they are the job engine of this century. The New York money people are all Democrats now on social issues. That’s why they were so dismissive of Sarah Palin. She is a “Wal Mart Republican.”
The failure of Democrat dominated states like Illinois and California is a prediction of the Obama administration performance.
Hold on to your hats. They know nothing about energy except that it makes global warming worse. It will take a decade of global cooling to change this.
MIke K (155601) — 10/4/2008 @ 12:32 pmPhil, if you read the article DRJ linked to, you’d see there are real tax increases involved which amount to 3.9 billion USD.
The Democrats are not trying to cause economic collapse. Their actions are based on a simple fact–people get interested in alternative energy only when gas prices are high enough to cause pain. Therefore, to stimulate demand for alternative energy, oil and gas prices need to stay high, or even go higher.
I would be in general agreement with this, except for the fact that high oil and gas prices result in rural areas and truckers getting shafted. No mass transit system will ever work in rural Georgia, nor will it ever bring the peaches and peanuts rural Georgia produces to other parts of the country.
kishnevi (79366b) — 10/4/2008 @ 1:09 pmToo late for that. America is already seeing it’s economic and financial power (and security) diminish and those who do not wish it well in the world taking advantage of it.
To put it into prospective, this is as huge a fall as the break up of the Soviet Union. And a direct result of American economic arrogance.
Our European allies feel pity, Russia thinks it’s our equal on the world stage and Ahmenijhad is preening that he defeated Bush. It’s not so difficult to surmise that AQ feels 911 played a huge part and they wouldn’t be wrong, considering the regulations that were removed from the markets and the financial instruments that were allowed after 911 to spur the economy out of recession. But the impression is one of a weaker America and when that perception is allowed, is surely when your enemies begin to sharpen their knives again. Which is ironic considering the trillion dollars that will soon have been spent on making the nation safer through invading Iraq.
So, George W. Bush, has now overseen the this nations regression from preeminent singular World Power to ailing second rate behemoth.
Mistaking ACORN and CRA and FANNIE MAE and FREDDIE as the cause of the credit crisis is mistaking the symptoms for the disease. It’s short sighted and wrong beyond imagination to lay this disaster at the feet of poor minorities seeking out loans to buy a home. Especially when CEOs walked away from companies they forced into weakened positions, with millions in golden parachutes. It’s grotesque.
The problem is much deeper and lies in the un- fettered actions of the private sector and the dogma of Free Market Fundamentalism. Now an utter failure even if it’s last remaining acolytes are too blinded by ideology to see that, is now thoroughly repudiated and ridiculed worldwide as being of unsound and disastrous design. The market will NOT heal itself and do what is good for society and the general good. Unregulated selfishness and greed is NOT good. It does not create endless jobs and prosperity because in the end an unregulated free market that is unregulated only for the rich becomes corrupt, absolutely so and will not only cannibalize itself, but hinder the healthy elements of an economy in the search for greater and greater short term profits.
But you people go ahead and keep playing games with ACORN and CRA and FM and trying to get this to stick to the Democrats, but you’re wrong, deadly and terribly wrong and that ignorance needs to come to an end.
Both parties are to blame for what’s happened here. The Right for being so ideologically blinkered by an unsustainable and selfish approach to capitalism and the left and Democrats for jumping onto the party wagon without having the backbone to stand up to the intoxicating idea of wealth generated from nothing, but speculation and carefully packed and bundled and misleadingly sanctioned and rated (by the rating agencies) mortgages not worth the paper they were written on. And the economists and the 109th Congress and a President who had no ability or desire to understand what was happening.
Read this. This is how the world sees the United States now:
http://www.spiegel.de/international/world/0,1518,581502,00.html
Peter (e70d1c) — 10/4/2008 @ 1:32 pmYeah, let’s tax the hell out of the proletariat, for we know better. Any tax on oil and gas companies is regressive, no matter how you slice it. Poor folks are more likely to live the farthest from their places of work, ergo they typically pay the highest transportation costs via their gas bills. This is not a debatable point anymore, even the Dem politicos in car – centric places like CA are well aware of this dynamic. This dynamic also fails the test for the idea of “getting more people and companies to use alternative fuel sources,” since those people most in need of those initial prototypes are among those who can least afford them. Another failed example of Top – Down management of the economy in action. Total madness.
Dmac (cc81d9) — 10/4/2008 @ 1:45 pmAs if to buttress this point: people in Chicago pay four separate taxes on their gas: City, County, State and Federal. As fuel prices shot up earlier in the year, guess what happened to the state coffers? Yes, they’re just about emptied out at this point, because drivers responded in exactly the expected fashion after this market shift – they started driving a hell of a lot less, ergo less tax revenues. Duh.
Dmac (cc81d9) — 10/4/2008 @ 1:48 pmThe House and Senate passed the pork, sweeteners, whatever you want to call it, in generally this sequence: The House passed H.R.6049 in May, 2008 and sent it to the Senate. The Senate larded up H.R.6049 with more pork, and passed it 93-2 on September 23rd. It sent that amended version to the House on Sept 29. The House was going to kill the bill by inaction, because it objected to certain tax measures not having corresponding tax increases – I’m doing this from memory, but I think the difference of opinion was either on some “ax extender” measure, or on “how to pay for adjusting AMT.” At any rate, all that pork was sitting in the House, ripe for passage if DEM leadership took it up.
cboldt (3d73dd) — 10/4/2008 @ 2:29 pm.
Separately (at least for a time), the House-considered-rejected a bailout, but the House-considered-rejected bailout was really the result of intercameral and administration negotiations in a back room. One could see Senators Gregg and Dodd in the background when the so-called “House language” for the bailout was introduced on Saturday or Sunday. The House rejected the negotiated language by a narrow margin.
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The House and Senate leaders again went to the back rooms, and decided to combine HR 6049 and the bailout – Lord only know what the rationale or trade-offs were, but I don’t see it as a “pork for bailout” trade, because the pork was already there for the taking – except it would have taken a few days to negotiate the differences if that bill had gone through the usual House amendment, Senate amendment process. The negotiated combination, H.R.1424, passed the Senate on a 74-25, and passed the House 263-171.
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I think the political parties were close to agreement on both bills (remember the Senate passed the pork 93-2), and just took advantage of the opportunity presented by the “must pass” bailout to also adjust and pass H.R.6049.
Hollywood production is more important to the typical American than gasoline?
I don’t think so.
Increasing Hollywood profits so celebs can throw parties and give money to Dems?
Apparently Dems think that’s important.
The feds already get more “profit” out of a gallon of gasoline than the oil companies do, right? Maybe their profits should be decreased as well. Sounds logical, doesn’t it?
MAIN LESSON?
MD in Philly (3d3f72) — 10/4/2008 @ 3:20 pmThere is a reason the Congress is far less popular than the President. Will that mean people will throw out those who have been in power the last two years as Congress’ popularity has plummeted? Doubtful.
Someone ealier made the remark that if you want to see what an Obama Administration will do for America, all you have to do is look to Illinois and California today. That is prescient.
The (criminal) political corruption that we see in IL is world famous; and, CA is in a state of virtual bankruptcy at the state and local levels due to selling the political process to the unions with the gift of civil-service union organizing by the Brown Admin. in the mid-70’s.
CA has continually, with a few slowdowns during the occassional GOP Gov, increased the costs of doing business. This has led to an out-migration unprecedented in CA. Tax-generating businesses, and tax-paying workers have left CA in ever-increasing numbers for states that have a more friendly business, and tax climate.
We are starting to see the same phenomena at the Federal level. It started with the chasing of IPO’s overseas by the very expensive accounting requirements for public firms under Sarbannes-Oxley. With an enlarged, veto-proof, majoritiy in both the House and Senate, anti-business, high-tax legislation will flourish and drive more and more businesses to off-shore locations – see how the Oil-Patch is relocating from Houston to Dubai (and other Persian Gulf City-States).
As long as the two parties are both government-centric, this problem will only get worse; and, it is virtually impossible for small-government politicians to succeed in a culture that is dominated by a pro, big-government media.
We shall live in interesting times!
AOracle (28e671) — 10/4/2008 @ 3:35 pmAs far as Hollyweird goes, next thing you know is that the places where they have tended to go for filming and tv shows, such as North Carolina and Vancouver, will lower their taxes.
Also, the tax breaks will allow the Hollywood unions to ask for more money, which is why so much filming goes elsewhere.
William Teach (4eeb65) — 10/4/2008 @ 3:42 pmA line I’d like Palin to use: “Now, you’re going to hear a lot from our opponents how I don’t look like all those other vice-Presidential candidates; how my temperament is different, or I’m not a lawyer or a professional politician, or maybe I come from a town with a funny name instead of the big city…”
Kevin Murphy (eb4d6c) — 10/4/2008 @ 5:09 pmooops, wrong post
Kevin Murphy (eb4d6c) — 10/4/2008 @ 5:11 pmMD in Philly–actually, “Hollywood” films in a whole bunch of places that are not near Hollywood, California. (The state identification is not surplasage. There is a Hollywood, Florida, and every so often movie and TV crews show up there.)
kishnevi (e88f15) — 10/4/2008 @ 5:33 pmOne film can result in some very hefty sums going to local businesses (including, obviously, hotels and restaurants for out of town actors and crew, but also wages for extras, rent for locations used in scenery, money paid to local businesses in support of the films for clothing used by costumes, interior decor–a lot of that stuff originates locally and isn’t brought in from California.)
Teach – the tax breaks will allow the Hollywood unions to ask for more money, which is why so much filming goes elsewhere.
Not necessarily. Large studios are usually union signators, meaning they will pay at least scale no matter where they shoot. Also, IATSE, DGA and SAG are international unions, and it is difficult to get around paying union wages, although small differences occur.
What has happened, in practice, is that studios are playing a worldwide game of culling tax incentives to help offset production costs. After they burn through a particular state or country, they move on to the better deal. The money originates mainly with the majors, who are based in the Los Angeles area, but its the tax incentives that help lure production, not union costs.
Apogee (366e8b) — 10/4/2008 @ 5:48 pmRan across this Ridley Scott anti-deficit video from 1986. The “WR Grace commercial.” Boy did the politicians whine. Ought to dust it off and run it again
Kevin Murphy (eb4d6c) — 10/4/2008 @ 6:30 pmThe bailout is interesting to say the least. I feel the taxpayers will perculate on this extension of blathering goop for decades. The index of a nagative percentage will over copulate the end result. By inserting dangling participles into this legislation, our politicians have galvenized our pondering citizens beyond recognition……….This was written just like most of the crap that comes from the D.C. Bung Hole.
D.C. Legislation Writer (680eb5) — 10/4/2008 @ 9:47 pmComment by D.C. Legislation Writer — 10/4/2008 @ 9:47 pm
Someone is trying very hard to sound perceptive and learned.
AOracle (28e671) — 10/4/2008 @ 10:16 pmWay I figure it is:
A) The money goes down the drain and taxes go up to service the debt.
B) The Treasury gets paid back and then some, Obama spends it, and taxes go up a bit less.
Kevin Murphy (0b2493) — 10/4/2008 @ 10:38 pmFar be it from me to differ, but didn’t a large majority of Democrats vote in favor of the no-pork 3 page bail out that the President and the Leadership worked out??
Didn’t a majority of the Republicans vote against it, and then after the pork-filled 400+ page Senate bill came in 25congressmen, more than enough to have passed the first(porkless)bill, switched their vote?
Look I am a Conservative, but lets call it straight. This was Republican pork and without it the GOP in the house would have torpedoed it again. This has been typical of Congress for the last 8 years. Conservative is not a label, it is a way of thinking, and the Neo-cons in the House are no more conservative than the bloggers at Talkleft.
Conservatives vote to keep pork down, support free markets even when they fail, and stop criminals from screwing the rest of us. The Republicans in (save a few like Jeff Flake, and Ron Paul)have no idea what the hell the word conservative means.
No sir, the pork in this bill was caused by and wanted by the Republicans in the House. It doesn’t make the Dems better, it just reminds us that the Republicans aren’t better either.
That Lawyer Dude (bebd53) — 10/4/2008 @ 10:42 pmWhat Congress wants is to be re-elected.
There may be an odd member or two who don’t, but they’re more in the nature of exceptions proving the rule.
htom (412a17) — 10/4/2008 @ 11:00 pmWhat Congress wants is no accountability for disasters such as this bailout.
Apogee (366e8b) — 10/5/2008 @ 1:47 amBail-out Fall-out I’d like to see:
A morning paper headline in response to CA and MA wanting a loan from Congress to stave off their impending dooms…
“Congress to MA/CA: Drop Dead!”
AOracle (e6d3fc) — 10/5/2008 @ 6:04 pm