08 August, 2008

Barack - Let Me Help You With Math

Because you're obviously having trouble.

Senator Barack Obama (D-IL) has proposed another round of economic stimulus checks, this one amounting to $1000 for each family in the U.S.

Let's ignore for the moment that he's literally trying to buy your vote. At least when other candidates try to buy your vote they disguise it with plans "to increase Medicare benefits", or "lower your taxes", or "help your children go to college". He's actually telling you flat out that he'll send you a check for getting him elected.

Where's he going to get the money for this? Taxing windfall profits from oil companies, of course.

So, let me get this right. You think gas prices are too high, so you're going to raise taxes on the people you feel are overcharging for their product?

Leaving the idiocy of that aside for the moment, let's just concentrate on his numbers.

There are about 120 million households in the United States. To send $1000 stimulus checks to each and every one of them would cost $120 billion dollars, not including the cost to print them, put them in envelopes, mail them, process the deposits, etc.

Last year, the US oil industry's profits were in the neighborhood of $90 billion. That's net profit, after taxes.

So, forget about windfall profits, you want to tax them at 100% on their profits and an additional $30 billion dollars.  In Obama's defense, presumably he's not expecting the oil companies to come up with all of this money at once.

If they get two whole years to come up with the money, it's a 67% tax on their profits, in addition to the taxes they're already paying.

For three years, it looks a little better, 33%, That is as long as you don't think about what taxes they're already paying. This site says that Exxon alone will pay $40 billion in taxes this year.

Now, the other thing to remember here is that whenever a politician starts talking to you about taxing corporations, you know that at least one of the following three things is true:

  1. They're lying.
  2. They're stupid.
  3. They think you're stupid.

Possibly (probably?) all three.

This point can not be emphasized enough.  Corporations don't pay taxes!

Never have. Never will.

Taxes paid by corporations are passed on to three groups: employees, shareholders, and consumers. So, what's going to happen when there's a huge increase in the tax rate for oil companies?  Wages for workers at the oil companies will go down (or at least remain stagnant), gas prices will go up, and your 401(k) (assuming it owns oil stocks) will go down.

In short, big oil won't be paying the tax, you will.

In addition, here's a beautiful quote from a recent Treasury Department research paper on corporate taxes.

Furthermore, given the possibility that the corporate income tax creates a variety of distortions, the economic burden of the tax exceeds the amount of revenue raised by the tax.

In other words, corporate taxes can result in a net loss of revenue!

So, not only is he going to hurt the employees, shareholders, and consumers, he's going to hit you with a double whammy because the tax may result in a net loss of revenue, and not be able to fund the stimulus checks at all.

Which means you'll end up footing that bill too.

So, to sum up, the stimulus checks based on the "windfall profits tax" will:

  1. Increase the price of gasoline
  2. Lower "real wages" for oil employees
  3. Cost shareholders money
  4. Increase your taxes to pay for the stimulus checks that the "windfall profits tax" didn't pay for.

Ok, #4 isn't guaranteed, but is possible. The first three are guaranteed.

Who exactly comes out a winner from this? Other than Obama, I mean.

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