Are you surprised, truly? All right, I’ll play along.
We have a progressive tax system. So the majority of the costs are born by the wealthy and the well-off, rather than the working class. Some of the well-to-do got that way by grit and hard work; others by luck; and at least a few by fraud and worse. They’re the winners of a somewhat-arbitrary game, and I don’t see anything wrong with tweaking the rules in pursuit of a collective good, like wider solar panel deployment.
Meanwhile! We know that most industries have quite dramatic learning-by-doing and returns to scale. And yet in this fallen world transaction costs and imperfect information can prevent new technologies from getting enough scale practice to become economically viable. So temporary subsidies in the early stage have a good chance of bringing costs down for everyone.
I’m very glad to be the first to introduce you to these arguments, if I am. You don’t have to agree: I left my mind-control goggles in my other coat. But please, don’t play dumb.
Yes, it obviously is ok? Your next restaurant meal doesn't have a broad impact on the world we live in, whereas the deployment of solar panels does.
It's amazing how ignorant people can be to the world around them. Let's assume you live in the US, since the article is dealing with those subsidies.
The food you're eating - c. 20% of US farm income is subsidies [0]
The employees of the restaurant - probably, at least one of them is on a government support program to augment their wages [1]
The car you drove to the restaurant in - the US Federal government subsidized your gas (ever wonder why US gas is cheaper than Canada/EU?) [2]
So maybe instead of spending your time looking down your nose and 'not understanding why people don't understand economics,' why don't you do research on the world around you?
[0] https://perc.tamu.edu/PERC-Blog/PERC-Blog/U-S-Farm-Subsidies...
[1] https://www.gao.gov/products/gao-21-45
[2] https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subs...
US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply and, more importantly, b) US fuel taxes are less.
If you actually read the EESI paper you cited, you see that the "subsidies", whether direct or indirect, are actually varying accounting treatments; basically, the same amount of taxes are collected but over a longer period of time. In any case, even if you were to remove all the direct "subsidies", the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
Let's go through your argument (would you believe I did both read and understand the document I linked!?), but before we do that, let's look at some more traditional subsidies that O&G gets in America: [0]
The GAO has reported extensively that taxpayers have not received a fair rate of return due to outdated fiscal terms. For example, Federal onshore oil and gas royalty rates are consistently lower than on State-issued leases and Federal offshore leases (see Tables 1 and 2); in fact, onshore royalty rates have never been raised. Likewise, bonding levels have not been raised for 60 years, and minimum bids and rents have been the same for over 30 years. If a lease is not sold competitively at auction, for two years it can be sold non-competitively for a modest administrative fee, with no bonus bid required. These noncompetitive leases are frequently less diligently developed as competitively issued leases. From 2013 to 2019, average revenues from competitive leases were nearly three times greater than revenues from noncompetitive leases.
Underpriced use of public land sure sounds like a subsidy to me!
Ok back to your comment, let's cherry-pick some arguments you made then get into accounting.
>US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply
Oh, I was unaware that the cheap gas phenomenon started in 2008 when we started approaching energy independence. Thanks Obama, I guess.
>b) US fuel taxes are less.
You're getting dangerously close to agreeing with me on the subsidy point, but I know we won't agree on the politics of pricing externalities, so I'll just move on.
> the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
It's an amazing logical fallacy to say "one number is smaller than another unrelated number, so the smaller number is unimportant," but even ignoring that, its still a subsidy and that's my entire point. Subsidies big and small are everywhere and this is one of them. I nowhere made an argument that O&G subsidies are going to bankrupt the US, just wanted to make OP aware of the fact that their gas is subsidized.
OK, now on to my favorite topic: why GAAP and cashflow accounting are different and why that actually matters, especially in CAPEX-driven balance sheet businesses.
1) The Intangible Drilling Costs Deduction - You are 100% wrong here. Depreciation and Amortization schedules exist for a reason, it's not just made up to keep EY busy footing 3-statement models. Let's run with this hypothetical: a business looks to build a well when prices are $100/barrel. In that first year of pumping, they successfully discover that the well is wet and they pay way less tax than they otherwise would because they got to amortize everything all at once. Now in year 2, that wet well is still producing but oil prices fall and it no longer makes sense to keep pumping. So now they have a known wet well (a balance sheet asset that they can restart at any time) and all the retained earnings from year 1 that the government never gets to claw back.
Compare this to a world without this subsidy where those expenses are amortized on expected useful life of the well. In this case, not only does the driller have incentive to keep producing even if prices fall, they absorb some of the pricing risk that the US government currently takes on.
If the US government intentionally absorbing pricing risk (arguably free insurance for O&G companies) is not a subsidy to you then again, we just disagree.
2) Percentage Depletion - In contrast, percentage depletion allows firms to deduct a set percentage from their taxable income. Because percentage depletion is not based on capital costs, total deductions can exceed capital costs. << Enough said
3) Foreign tax - Instead of claiming royalty payments as deductions, oil and gas companies are able to treat them as fully deductible foreign income tax. << Again, maybe you're not following the language here, but this is not "basically, the same amount of taxes are collected but over a longer period of time" it's "less taxes vs. other industries" (if you actually don't follow, tax paid to foreign governments isn't treated as a normal expense, it's usually covered in treaty agreements and is treated as tax already paid)
So yeah, not only are these real honest to goodness subsidies, they amount to billions of dollars a year!
[0]https://www.doi.gov/sites/doi.gov/files/report-on-the-federa...
I have no problem with raising lease rates for Federal land to market rates.
>>US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply
>Oh, I was unaware that the cheap gas phenomenon started in 2008 when we started approaching energy independence. Thanks Obama, I guess.
Oh, come now. It is a fact that, both historically and today, part (not all, but part) of the reason why US gas prices are lower than in the rest of the developed world is because the US is relatively self-sufficient. (And before you bring up Canada, Canada significantly lacks domestic refining capability, as well as ability to deliver its own gas to the eastern half of the country.)
2008 to now isn't the first time the US reached energy independence; the US had this status into the 1960s, and if it really needed to it could have always reached this, especially when including Canadian supply. The Gulf War was fought to maintain oil supply to Europe, not to the US.
>>b) US fuel taxes are less.
>You're getting dangerously close to agreeing with me on the subsidy point, but I know we won't agree on the politics of pricing externalities, so I'll just move on.
You and I both know that when people here and on Reddit claim that "the US subsidizes gas and that's why it's so cheap", 99% of the time it's meant to convey the claim "US gas companies get zillions in handouts from the government" (in the sort of bags with dollar signs that Mayor Quimby receives his bribes in), as opposed to "gas is taxed less in the US than elsewhere" (much less "US gas isn't appropriately pricing in externalities"), and 99% of the time that's the message that's taken away by the reader.
We indeed would not agree on the politics of pricing externalities (more precisely, whether such counts as "subsidies"). Your statement, however, implies that other countries' gax taxes are higher because they are more appropriately pricing said externalities. We both know that Canada or Belgium or Portugal's gax taxes are not higher than in the US because their governments have duly, nobly, and wisely calculated the impact of climate change and have set the tax rates accordingly. (Maybe Norway.) Said taxes are higher because their governments believe they are acceptable to the public, and are spent accordingly as part of general funds as opposed to being all (or even part) sent to a "global warming lockbox", or somesuch.
>> the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
>It's an amazing logical fallacy to say "one number is smaller than another unrelated number, so the smaller number is unimportant," but even ignoring that, its still a subsidy and that's my entire point.
First, both the degree and kind matter. Unless you rush to correct everyone who says that public schools/toll-less highways/police services are "free" with "Ackshually, they aren't free", you also agree.
Second, EIA says (<https://www.eia.gov/tools/faqs/faq.php?id=23&t=10>) that in 2021 135 billion gallons of gas were consumed in the US. We'll simplisticly say that every cent of of the $4 billion a year in "subsidies", which the EESI is presumably citing as a worst-case figure, can be assigned to gas. So each gallon is being "subsidized" by about $0.34. Not nothing (and, again, this is a worst-case figure), but relatively small versus the massive swing we saw in 2022 in the price per gallon (<https://www.cnn.com/2022/12/29/energy/oil-gas-prices-2022/in...>). More importantly, said amount is absolutely not the explanation for the difference in price per gallon/liter between the US and other developed countries, either.
I don't care what your opinion is. Again, just pointing out that it is a subsidy.
>Oh, come now. It is a fact that, both historically and today, part (not all, but part) of the reason why US gas prices are lower than in the rest of the developed world is because the US is relatively self-sufficient.
That's simply not true! 2008 was the beginning of the trend toward energy self sufficiency; please look at the data [0]. The US was far from self-sufficient for most of the 20th Century.
>You and I both know that when people here and on Reddit claim that "the US subsidizes gas and that's why it's so cheap", 99% of the time it's meant to convey the claim "US gas companies get zillions in handouts from the government" (in the sort of bags with dollar signs that Mayor Quimby receives his bribes in), as opposed to "gas is taxed less in the US than elsewhere" (much less "US gas isn't appropriately pricing in externalities"), and 99% of the time that's the message that's taken away by the reader.
This is hard to follow, but we do not agree there. I am just making the point that subsidies are poorly understood by you and the people on Reddit, yet no one seems to want to learn more about them.
>Your statement, however, implies that other countries' gax taxes are higher because they are more appropriately pricing said externalities. We both know that Canada or Belgium or Portugal's gax taxes are not higher than in the US because their governments have duly, nobly, and wisely calculated the impact of climate change and have set the tax rates accordingly. (Maybe Norway.) Said taxes are higher because their governments believe they are acceptable to the public, and are spent accordingly as part of general funds as opposed to being all (or even part) sent to a "global warming lockbox", or somesuch.
Again, pricing externalities does not work that way. It's not a "pay to solve the problems" thing, it's a "make the true cost apparent to the consumer" thing. Politicians often use the funds to solve the problem because that's a popular thing to do, but it's usually not the best use of funds anyway (receipts and expenditures, in general, should not be tied because then you're just randomly skewing markets rather than rationally governing).
>First, both the degree and kind matter.
Agreed, but again, what does the US Federal government receipts have to do with how much these subsidies skew the market?
>Second, EIA says (<https://www.eia.gov/tools/faqs/faq.php?id=23&t=10>) that in 2021 135 billion gallons of gas were consumed in the US. We'll simplisticly say that every cent of of the $4 billion a year in "subsidies", which the EESI is presumably citing as a worst-case figure, can be assigned to gas. So each gallon is being "subsidized" by about $0.34. Not nothing (and, again, this is a worst-case figure), but relatively small versus the massive swing we saw in 2022 in the price per gallon (<https://www.cnn.com/2022/12/29/energy/oil-gas-prices-2022/in...>). More importantly, said amount is absolutely not the explanation for the difference in price per gallon/liter between the US and other developed countries, either.
This is the most wildly incorrect part of your comment. Subsidies skew supply/demand curves, both of which have slopes. If it were as easy as you make it seem, we'd all be Economics PhDs.
The government does not give Exxon $0.34 per gallon it sells, it gives them incentives to do things they wouldn't otherwise do, and given supply and demand dynamics that has complex effects on the market.
And again, circling back here, all I'm trying to say is that the US meaningfully subsidizes energy, which they do. I honestly think it's a good thing! It's been the economic engine of growth for the US. I don't think we should stop! (notice how you assumed I had an agenda just by trying to state facts, maybe examine that a little...)
If you go up to my top comment, you'll see the GP was trying to imply that it's somehow unfair to subsidize solar and I was pointing out that they were ignoring all the other subsidies that we've gotten used to/take for granted.
[0]https://www.eia.gov/energyexplained/us-energy-facts/imports-...
Oh, good grief. The second sentence of your cite is "Up to the early 1950s, the United States produced most of the energy in consumed."
Let me repeat:
* The US was self-sufficient in oil until the 1960s.
* The US could always have been self-sufficient, or reasonably close to it, especially with Canadian supply. It would have been difficult/very expensive at times, but it could have been done.
* This is not true of the rest of the developed world. The Gulf War was fought to maintain supply to Europe, not the US (although the US benefited from the overall lower global prices as a result).
* Since 2008 or so fracking has brought about a second period of US self-sufficiency without most of the difficulties that would have been necessary in the second half of the 20th century.
>This is hard to follow
You know exactly what I meant.
You wrote:
>the US Federal government subsidized your gas (ever wonder why US gas is cheaper than Canada/EU?)
Even if you weren't trying to insinuate with the word "subsides" that the US wasn't actually giving out huge handouts to oil companies, that's what 99% of readers would take away from your statement.
>Again, pricing externalities does not work that way. It's not a "pay to solve the problems" thing, it's a "make the true cost apparent to the consumer" thing.
"Pricing externalities" implies that there is some sort of closer relationship in other countries between the price of gas and its "actual" cost (in terms of long-term environmental impact), including solutions for same. As I said, we both know that this is almost never the case.
As for affecting behavior in the here and now, higher gas taxes in, say, rural France or Ireland does not mean that French or Irish farmers are less willing to use gas-fueled trucks to carry produce to markets, because they have no alternative (at least right now; maybe this will change in the future with EV trucks). It means that they pay more per gallon to do so than their American counterparts. Period.
>This is the most wildly incorrect part of your comment. Subsidies skew supply/demand curves, both of which have slopes.
I would never deny that subsidies skew behavior. My point was that said "subsidies" were, even in the EESI paper you initially cited, relatively small compared to price per gallon or the overall petroleum market's size and behavior. This was true with the $0.34/gallon figure I initially erroneously calculated, and is certainly true for the correct ~$0.03/gallon figure (again, a "worst case scenario") I provided later! Feel free to tell people about how the US government distorts the gas market at three cents a gallon. I fear that the scale of their reaction will disappoint you.
>And again, circling back here, all I'm trying to say is that the US meaningfully subsidizes energy, which they do. I honestly think it's a good thing! It's been the economic engine of growth for the US. I don't think we should stop! (notice how you assumed I had an agenda just by trying to state facts, maybe examine that a little...)
This is you rapidly beating a retreat.
You began your first reply to me with
>Oh fun! I love when people Dunning-Kruger themselves on accounting (I literally just sat up straight in my chair!)
Basically, you saw the chance to unleash your superior accounting skills. Nothing wrong with that; I've certainly enjoyed doing so many times for things I know more about than other people.
You then said
>Let's go through your argument (would you believe I did both read and understand the document I linked!?),
Based on your missing the second sentence of the EIA document you cited above, the answer remains "No, I do not believe that you actually read the EESI paper before citing it the first time".
You are, of course, by now realizing that although you know more about accounting than me, all you have done is to "prove" that US gas is "subsidized" by the munificent sum of three cents per gallon. I thank you for doing so.
Good Greif to me?!?! You're saying that America making enough oil for the 70mn registered cars in 1960 [0] is evidence that it could make enough oil for the 225mn cars registered in 1999? [1] Don't even get me started on miles driven!
Aramco began Saudi nationalizion in 1950, and you claim that the US chose to up its reliance on them during that period? You have a very interesting understanding of O&G, my friend.
>You know exactly what I meant.
Lol. Ok. I guess I do, then.
>Even if you weren't trying to insinuate with the word "subsides" that the US wasn't actually giving out huge handouts to oil companies, that's what 99% of readers would take away from your statement.
Lol. Ok. I guess that's true, then.
>"Pricing externalities" implies that there is some sort of closer relationship in other countries between the price of gas and its "actual" cost (in terms of long-term environmental impact), including solutions for same.
Again, my entire point is you have no idea what you're talking about here. All that consumption taxes do is disincentive consumption. Per my last comment, often to make the taxes more popular, proceeds are used to "address" the underlying problem, but that's theater/bad governance that ignores the fungibility of tax revenue.
>As for affecting behavior in the here and now, higher gas taxes in, say, rural France or Ireland does not mean that French or Irish farmers are less willing to use gas-fueled trucks to carry produce to markets, because they have no alternative (at least right now; maybe this will change in the future with EV trucks). It means that they pay more per gallon to do so than their American counterparts. Period.
Boy I love a good binary. You don't think higher fuel costs encourage them to sell to more local distributors with lower transportation costs? I mean, we ship roses on airplanes from Ecuador en masse because of cheap fuel! [2]
>Feel free to tell people about how the US government distorts the gas market at three cents a gallon. I fear that the scale of their reaction will disappoint you.
Again, it's amazing to me that you think that these subsidies are direct consumer-facing price supports and I don't know how to explain more clearly that they are not.
>This is you rapidly beating a retreat.
What? Where's the contradiction? I don't care about your politics, I just want you to understand the situation better.
>You began your first reply to me with
Oh fun! I love when people Dunning-Kruger themselves on accounting (I literally just sat up straight in my chair!)
Yeah, because you made false claims about accounting? Are we just entering the "who is going to win" mode? Because then, by all means you've won if that's important to you, but please don't let it cloud your ability to incorporate new information (even if that new information goes against claims you made earlier. That's OK! That's learning!)
>Based on your missing the second sentence of the EIA document you cited above, the answer remains "No, I do not believe that you actually read the EESI paper before citing it the first time". You are, of course, by now realizing that although you know more about accounting than me, all you have done is to "prove" that US gas is "subsidized" by the munificent sum of three cents per gallon. I thank you for doing so.
This is tough to follow too, but again, small brain over here. I guess once I see the light about how (in your opinion) small subsidies aren't subsidies and subsidies to suppliers are best understood in consumer-facing terms, then I'll understand.
BTW, if corn is subsidized by like $5bn/year in the US, what's that per kernel? I bet a really small number!
[0] https://www.fhwa.dot.gov/ohim/summary95/mv200.pdf [1] https://www.bts.gov/content/number-us-aircraft-vehicles-vess... [2] https://www.routesonline.com/airports/7699/corporacion-quipo...
And nobody pays for anything with inflation. That's not how inflation works.
And what is the right share that the wealthy should pay, and how wealthy should one be to be paying that amount? I'm assuming it's some level of wealth above yours.
About half of the US doesn't pay any federal income tax, and a little over a quarter pays no net federal taxes at all, including payroll taxes. The labor force participation rate hit its peak in the 90s and has been steadily decreasing since then, with the last reading at 62.1%. Perhaps you should ask why three-fifths of adults aren't doing their share of the labor?
Careful that you don't cut yourself with all those edgy takes.
Otherwise, I ask that you keep empty comments out of the forum.
How is that not paying their share?
[1] https://taxfoundation.org/publications/latest-federal-income...
https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
Particularly since you carefully ignore that income is typically small fraction of the wealth of the 1%, most of which is capital and which largely escapes taxation.
Capital gains tax is a thing, and in most cases that capital is taxed multiple times through its "lifecycle". The reason capital gains are taxed at a lower rate is because we want to encourage capital investment. It's what makes things. Food. Jobs.
You're also following a flawed premise (many people do this) that wealth is a finite pool, or a zero-sum game.
It isn't.
There's no upper bound to wealth creation. It's not a limited pool. It's unlimited.
Wealth is created when a person, or group of people, create a product or service that other people desire. That's it. Anyone can do it, and successful people do - through a combination of work, opportunity identification and luck.
The ideology I see behind "wealth inequality" in the U.S. typically boils down to some derivative of envy.
The solution to "wealth inequality" isn't taxation - that only has the power to destroy.
The solution is individual, different for each person, their life goals and what sorts of things are important to them, but rests in creation and innovation.
That's what's created wealth through human history, and it's what will continue to do so, if we allow it.
Taxing others and giving it away is lots of fun until you run out of people to tax, and you've managed to disincentivize and destroy what wealth remains.
Take a look at Prodrazvyorstka [1] to see how that works out.
It's the "top 1 percent of taxpayers". So the people who paid the most taxes, paid the most taxes. They also made 20% of the total income. Or roughly 2 trillion dollars.
So if you managed to make a lot of money but also managed to avoid paying taxes on that money, you would not be included in "the top 1 percent of taxpayers".
The bottom 50% of taxpayers only made 11.1% of the income.
And that's the problem with all of this, there are ways to slice the data to try and gloss over the very real problem of wealth inequality we have right now.
Also, “subsidies” are really just a quaint term for “made the working and lower middle class that can’t pay for such exorbitant luxuries pay for it through taxes and inflation”.
I’m always a bit confused if seemingly otherwise smart people simply don’t understand something so basic, or if they simply just ignore and don’t want to acknowledge it as if that changes the fact.
Guess who else gets subsidies; someone who buys goods out of the truck of a car … wow, such a great deal.
Would anyone like to subsidize my next restaurant visit by paying for my entree? No? But making someone unknown working class person pay for my $25,000 solar install through inflation is ok?
How about we all just pay for the things we want I stead of making others pay for it? It’s immoral and evil, whether you call it subsidies or something else.