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Clinton Supports Big Summer Tax Break for the Oil Industry

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At least that is what Reuters claims. According to Reuters, Senator Clinton has joined John McCain in calling for the elimination of the gas tax over the summer months.

Given the quality of election reporting, this may sound like a populist measure to many voters. In reality, since refineries will already be running near flat out in the summer months, the benefit of the tax break will go almost entirely to the oil companies.

The point is simple. If refineries are at running at capacity then the supply of gas is effectively fixed. It is set at the levels that the refineries can produce. The price is then determined by demand. If the gas tax is reduced or eliminated, then the price will stay the same, you will just get money going to the oil companies instead of the government.


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Why don't they just form a unity ticket and the rest of us can get on to the business of defeating the status quo?

McCain/Clinton '08 - "The Oil Companies are Hurting, and We Feel Their Pain."

How many hundreds of thou has Obama taken from big oil execs today? Very hypocritical to run those ads saying he doesn't take "oil money" when all 3 take money from employees of the oil companies. See, mr. special is anything but...

Stop your whining!

Would it be horrible for oil company execs and employees to be real people and see a real leader for America and the World?

You can't compare the amounts of money he's getting from them by percentage.

The ONLY reason you saw headlines from Clinton pushing "Obama got more from oil company employees last month than I did" is because - gasp - she hardly raised ANY money.

Everybody is free to donate to the Obama campaign for him to succeed.

I can guarantee you he is NOT beholden to any special interests, unlike Clinton (who has Saudis funding her fundation by the hundreds of millions), or McCain, who had to embrace the neo-cons on the way to becoming the nominee.

Obama is OUR candidate. You're just jealous.

Didn't she run an ad on this?

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I think I'll go with Matt's "Credit Where Due" appreciation of political sophistication.

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Dean,
Aren't you leaving something out? From link:

"Hillary Clinton knows it's time to act, take some of the windfall profits of big oil to pay to suspend the gas tax this summer, investigate the oil giants for price gouging and collusion," the ad said.

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Don,

Clinton obviously is not president at the moment and not in a position to push through a specific proposal. She is in a position to influence measures that could get through Congress.

Senator McCain made a totally demagogic proposal for repealing the gas tax for the summer, implying that this means money in the pockets of drivers. Of course cutting the tax doesn't mean that -- it means more money in the pockets of the oil industry.

Clinton has now endorsed the logic of McCain's proposal, giving it respectability, when it should be roundly denounced by anyone not on McCain's payroll.

There is absolutely zero chance that Congress will pass and Bush will approve a windfall profits tax of any size. It is not impossible that McCain's (and now Clinton's) nonsense idea about eliminating the gas tax to give drivers relief could get through.

I understand that Clinton is running for president and can't be bothered by the implications of her proposals, but the rest of us have to be.

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I understand your position that these are empty campaign promises and Clinton has no intention of pushing for it, but I don’t think you can make that case at this point. You may be right that the chance of bringing back windfall tax now is implausible though I wouldn’t say absolute zero. It certainly doesn’t stand a chance if it’s pronounced dead in the water by those who make these judgments. My view is that Clinton has been the only one who has bothered to thoroughly think through her proposals and not just adopt wholesale and tweak the plans of others.

The question of windfall taxes pops up periodically (I remember talking about this after the post-Katrina price gouging and first Exxon $10 billion profit quarters). Some of Carter's reforms are looking good again. Gasoline tax is a purely regressive tax and people are hurting. $4/gallon at the pump during a recession seems a good time to push it and who knows (it is a Democratic Congress, isn’t it?). Universal health care is going to be an impossible battle, too, with the giant lumbering lobby rolling over its lumpy mass to smother it, but that is no reason not to fight for it or to surrender your weapons to the other side before the battle has begun (as with the demonizing of mandates).

Of course, McCain demagogues every issue, but that has nothing to do with Clinton or Obama except that they must make that clear to the public. Then too, think about how Clinton’ fuel-relief proposal will look in late summer in direct comparison to McClain’s (which would rebate to the oil companies) and McCain’s compared to Obama’s proposal, which is adverse to any relief.

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Don,

I'm all for a windfall profits tax and argued for it myself post-Katrina [http://www.cepr.net/index.php/publications/reports/taxing-exxon-s-windfall-from-hurricane-katrina/]. But, Clinton's proposal is pure demagoguery, it would do nothing even if she got it exactly as proposed.

The price of gas will not change. Consumers will pay just as much as they do now. What's the relief?

The lost tax revenue to the government will end up as higher corporate profits. But, unlike McCain, Clinton wants to tax it back with a windfall profits tax.

Okay, let's cut the garbage. I know that Clinton wants to be president, but the only thing this proposal can possibly do is increase the likelihood that McCain's tax break for the oil industry gets through.

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That sounds more like the oil companies giving a rebate directly to taxpayers.

Considering we subsidize them to upgrade infrastructure, build refineries, and find new sources, it seems to me we SHOULD get a rebate from them.

They've done none of those things as far as I know.

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That a boilermaker, Workerbee?

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Yeah. They'll illegal in Connecticut.

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grrrr I meant, they're illegal.

:)

Either Democratic candidate should have the courage to point out the idiocy of McCain's "gas tax holiday" idea. It is very disappointing that Sen. Clinton appears to be signing on to this nonsensical scheme, which would massively divert federal funds for necessary infrastructure maintenance, toward exactly who DOESN'T need it right now -- the oil industry.

If Senator Obama wants to increase his own substance quotient, he should speak out against this lunatic idea now.

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Actually, I saw him say exactly this in a Q&A today in Indiana. (I saw it on cnn.com LIVE). He said a consumer would only save $25, but all the money that would go to infrastructure would be gone. Remember that bridge in Minnesota, he said.

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Clinton’s relief plan with windfall taxes on the oil companies may or may not be feasible (I think it’s worth a shot). But on a political level, Obama’s answer is going to sound tone deaf to those working class voters he’s desperately courting. He’s basically telling people living paycheck to paycheck who have to use their cars to work or travel (the only affordable holiday for many and their only relief from their workaday struggle right now) to just quit driving so much. He might as well tell them to go out and buy a new Prius.

I'm sorry to come off as elitist, but if oil and gas supplies are (at least in the short run) essentially fixed, then prices are currently set only by demand.

If anyone thinks McCain's "plan" makes any sense, why shouldn't the government really help out the Average Joe, by giving out a tax credit of a buck or two for every gallon of gas he buys? Of course, that would only make America's (and the world's) energy situation that much worse.

Driving a Prius (or another hybrid) is one of the few practical no-compromise steps gas users can take; it is faux populism to suggest otherwise. And we all know how French that is.

Don, you are wrong.

The Prius is not a bad car, true, for many people. Not for everyone.

And unless and until we make reworking our entire energy (and transportation) infrastructure a national policy priority, we are not - repeat, not, going to CFL and Prius our way out of this. Not. Going. To. Happen.

Comprehensive public transport, high speed intercity rail, drastically more energy-efficient buildings - especially commercial structures, and an emphasis on such things as wind, solar, hydro, geothermal, tidal, current, and nuclear generation are all going to have to happen on a much greater scale than currently. We will need to redirect our combustion-based energy infrastructure towards building the non-combustion-based future.

Drive a Prius (a) if you can afford one, and (b) it makes you feel good about yourself. Harbor no illusions that you are solving anything.

And let's have a word with India and China as well. The upper atmosphere does not care where CO2 originates.

Oh, and one last thing. Try to have fewer children in the future.

CFL? Canadian Football League? No faux know-nothing-ism here, just good ol' American ignorance.

CO2 is entirely beside the point here. Last time I checked, burning a gallon of gasoline released the same greenhouse gases whether is cost $1.00, or $4.00, or $10.00. (Also, because it is heavier than nitrogen, and luckily for earth-bound plant life, CO2 doesn't tend to collect in the upper atmosphere.)

And hybrid or not-hybrid isn't really the issue either. The point is, all other things being equal, 40 MPG is better than 20 MPG. Recommending a Prius to the working class may seem elitist, but it strikes me as a helluva lot more practical than waiting for that gleaming high-speed intercity rail to arrive.

For what it's worth, I'm 49 years old, so I'm not expecting to have any children in the future. And I don't own a car.

CFL = compact fluorescent...

And recommending a Prius to the "working class", as you so graciously refer to us, is in fact elitist, as it's a car that carries people well while not serving the needs of those who have to carry things such as tools, building materials, large cases of whatever, and the other sorts of things that don't fit well in a compact, hybrid or not. Or who need to, as I have, go off-road with a vehicle filled with such stuff. How well will your Prius do on an unpaved National Park Service maintenance road in wet weather, carrying 400 pounds of gear?

Face it, Don, you're a snob.

And driving less is really a better answer in any case. Which means buses and light rail within cities, and intercity rail whenever possible, really are the answers. It's about passenger-mile numbers, which an elitist certainly ought to have at least a nodding familiarity with in these days of modern time...

There exist hybrid SUV's that perform functionally just as well as "regular" ones, while using substantially less in the way of fuel. I see no reason why an energy-saving pickup truck would intrinsically impractical, or a bad idea somehow. In any case, most SUV's are seldom or never taken off-road; most are expensive suburbanite affectations, and an extravagantly wasteful fad.

Apologies for my CFL ignorance. I still don't see what compact fluorescent light bulbs have to do with $4.00 per gallon gasoline, unless you find the whole idea of energy conservation unbearably elitist, no matter how practical it may be.

You apparently find the term "working class" snobbishly offensive. Sorry, no offense intended; my own annual income is in the low $20,000's. Do you have a preferred alternative? For my part, I slightly prefer "elitist" to "snob", though both are put-down words that serve to stifle, rather than honestly engage, ideas one disagrees with.

No, I find your inclination to tell others what you feel they must do both snobbish and elitist. Especially since (a) the issues of oil prices and climate change are going to be linked for as long as there remains oil to be extracted and burned, and (b) because you seem to find theatrics "practical" rather than facing the fact that the real solutions are necessarily much broader and deeper than such things.

And I, unlike you, am proudly working class. Born into it, got an education, still make my living using both my brain and (among other parts) my hands. And I only talk down to the self-righteous.

I'm confused. You call yourself "proudly working class", but you get in a sarcastic huff when I use the same term. I have resisted (so far) the temptation to call you names, and yet you feel free to repeatedly level clumsy assertions of snobbery and self-righteousness at me. I resent your remarks, which I think are uncalled for.

Yes, the issues of oil prices and climate change are linked, but the rapid increase in oil prices tends to REDUCE oil consumption and greenhouse gas emissions. So what is the point of bringing up the CO2 issue in this context?

If your National Park off-road hauling needs can only be satisfied by driving a Suburban, that's your decision, and it's fine with me, as long as you're not asking me to subsidize your gas guzzler. I believe that most people who drive a 12 mpg Suburban could trade up to a 20 mpg van. ("Most people," I said, not you -- I'm sure you're one of the manly men who really needs all that masculine capacity.) At least you're not so silly as to be waiting for a high-speed rail connection to your rugged off-road destination. Or (still worse) to be advocating the special tax deductibility of certain ultra-large vehicles, such as Hummers.

I believe most people, including working class people, are capable of making intelligent trade-offs when energy prices are high. (A good thing, too, because I believe they are going to be high indefinitely.) That includes factoring energy prices into their purchasing decisions for refrigerators, light bulbs, and automobiles.

I agree with you that conservation will not be the sole salvation to our nation's energy problems. However, conservation is undoubtedly part of the solution, and it often represents the lowest-hanging fruit. It goes beyond grouchiness, all the way to plain foolishness, to denigrate conservation for aesthetic reasons, because it's just too affectedly "theatrical".

I'm sorry, I think people who defend SUVs on the grounds that no other vehicle would accomodate their obviously thousands of dollars worth of camping gear on unpaved national Park roads are, not only elitist, but suffering from a really bad dose of the sense of entitlement disease. And as far as those big box items the poor workign class can't get home without a truck, that's what roof racks are for.

My vehicle was loaded with work gear. I don't camp.

And none of it could ever be safely entrusted to a roof rack.

Are you also ignorant of what the physics of hundreds of pounds on a roof rack does to a small vehicle? If so, please put a lot of weight (3-400 lbs. ought to do it) on your roof rack and go driving (fast) on an unpaved road. Your learning experience will do those of us who live in the real world a favor.

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Dean,

I'm going to try your patience here, you need to explain this to me like I'm a 10 year old. By the way, I figured it was demogoguery.

Lets say gas is $4.20 per gallon, the 20 cents being federal tax. The oil company collects the 20 cents and sends it to the Feds. If the Feds rescind the tax, won't the price drop to $4.00 per gallon?

Or will demand for the cheaper gas drive the price back up to $4.20 per gallon?

Sorry for being so dense.

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Jon,

Imagine that the oil refineries spew out 500 million gallons of gas a day independent of the price -- in other words, they are producing at capacity. The question is then at what price will drivers buy 500 million gallons of gas a day.

Let's say that the price at which drivers will be prepared to buy 500 million gallons of gas per day is $4.20. Now let's assume that we have a 20 cent a gallon gas tax. This means that $4 goes to the oil company and 20 cents goes to the government.

Now suppose that senators McCain and clinton have eliminated the gas tax. The price at which drivers are willing to buy 500 million gallons of gas a day is still $4.20. The only different is that now none of the money goes to the government, the full $4.20 goes to oil companies.

Oh yeah -- the senators get to boast about how they have given consumers a tax break on gasoline.

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Exactly. Only if there are price controls does the relief mean anything.

We don't want people to buy more gasoline, only to not go broke trying to get to work or deliver goods. Gas stamps, maybe?

TomWright, that's a fine idea as the true working poor -- who may in large numbers have to begin choosing between food and gas relatively soon -- will obviously need some relief. But as for those of us who are average working class and can get by if we curb excesses, it's irresponsible for our candidates to subsidize bad habits. Still, you do have to know that Joe Lunchbox probably wouldn't like this idea if it left him out. Might leave him...well, bitter.

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Dean,

I got it now, thanks for the explanation.

ole dopey John :-)

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I thank you for the explanation, too (if John’s an economic 10 y.o., I’m 8). I think Harry Reid was calling for gas tax relief a couple of years ago, too. Would it really fail to provide any relief to people? Anyway, I didn’t mean to just sound contrarian above but thought your title and confluence of the Clinton/McCain proposals misleading. It seemed that Clinton was calling for an investigation of the oil companies and a windfall profits tax, while supporting McCain’s tax holiday only if it is paid for with windfall taxes. McCain makes a popular proposal (even if it is pie-in-the-sky pandering) and Clinton piggybacks reforms onto that. I see that Obama has also come out now in favor of windfall taxes. I hope this leads to something.

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Just want to point out that Obama supports a windfall tax as well.

Not exactly.

Sorry DancingBear, retract that last. I read you backwards.

Thanks Dean for explaining this incredibly simple economic idea which only Obama seems to understand. So while oil companies are making record profits due to supply constraints, they ought be be investing in alternative sources, or be taxed for this purpose. How about a windfall tax with a tax credit for renewable energy investment?

Lets face it, in the short term there is essentially nothing that can be done about gas prices short of price controls (or government subsidies-with what money?). Is that the right thing to do? If I didn't see 50% SUVs and a fair number of Hummers on the road, I might say yes, temporarily. But unfortunately, it has become clear that the only signal American consumers pay attention to is price. So be it, the price is right, or even low, considering the world economy, the global warming problem, and increasing demand from the third world. Trade in your hummer for a civic.

In the long term, alternative fuels (not corn ethanol!), electrically powered vehicles from renewable electrical sources, etc. will manage transportation costs, but it will never be at the equivalent of $1.50/g again. Get used to it.

"Lets face it, in the short term there is essentially nothing that can be done about gas prices short of price controls (or government subsidies-with what money?)"

Actually the logic of Dean's post says that there is one short-term step the government could take: a major INCREASE in gasoline taxes. If our government raised its gas tax to something approaching the world standard, it would be a huge revenue generator, while not affecting our price at the pump by much or at all. (Remember, in a fixed-supply environment, the market-clearing price is strictly a function of demand.)

The major spikes in most commodity prices, including oil, are mainly due to China's and India's (and Vietnam's, etc.) rapid industrialization, or rather, their metamorphosis from agrarian to information age economies. While this represents a seismic-level global demand-shock, the development of a global middle class is probably, on balance, a good thing.

Agreed, in fact their movement to the 'First World' is the only way to manage trade and other economic issues in the long run. Our dollar decline is also however a contributor to oil price hikes, but that is due to excessive borrowing. Think on this, while the price of gas has doubled in the US in the last 2 years, it has only gone up about 15% in Europe.

Still, this is all chickens coming home. Real economic development, healthcare, and investment in future technologies is the only way forward. Spending trillions protecting a diminishing supply of oil is not, although sadly I expect we will be doing it again before my life is over; we just won't have switched to alternatives fast enough.

The price of gas is ridiulously low in America and the only thing that will cut its consumption is a rise in its price. Sad that our leaders nave been as adolescent as the people they are rumored to represent, and there's been such piss poor investment in public transportation that there is no alternative to their trucks and SUV's for a great many people. But there you have it. Maybe the hurting working class will not only learn not to vote against their own (and the earth's best) best interests one day, but learn what their best interests are. Beyond that, Clinton and McCain are playing bread and circus tricks. More of the same old same old.

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I think working class people have a good idea about what is in their best interests. Even if they are wrong, it is their choice. While there may be a link between education and wealth and social conscience, the bigger factor is what one can afford to do. Oil is polluting and isn’t replenishable. It will eventually run out of course, but the crisis atmosphere including our overseas adventures only profit big oil. The middle class in America was created through low-cost transportation. I understand the arguments about higher gas prices forcing less consumption but there are many people who are slowly sinking as gas prices (then food, goods, etc.) rise and they need some help.

Working folks did downgrade in the ‘70s and ‘80s to better MPG vehicles (mini-) but were gradually sold again on bigger is better. I think upper income people will be the last to conserve because they don’t have to. Tax incentives to buy $50,000 SUVs and refusing to push CAFÉ standards (incentives to Detroit to build SUVs) are more responsible for guzzling than the guy trying to get by and support his or her family. Reversing oil dependence shouldn’t be placed on the backs of those who can least afford it, though I’m sure it will.

I suspect it will still be this way because they really do consume the most, in aggregate if not individually. Maybe a carbon tax (gasp!) with a income adjusted rebate every year such that low income folks get a subsidy worth a fair amount while rich folk do not...

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Yes, there are a lot of good ideas and I think the approach has to be from every angle. Wasn't there talk in the '70s of nationalizing big oil? Even if it was only talk, it might make them more amenable to windfall profits taxes that could be invested in alternatives and relief for the working poor.

Gee, I hope that is not the money they were using to contribute to the Obama campaign.

Try harder.

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Someone who has spent $50,000 on a gas-guzzling SUV is going to be much less concerned about $4 gas than a worker driving in a Honda Civic. And raising gas prices still higher will have a much more negative impact on the Civic driver, even though Civics get much better gas mileage. What we should have is big gas-guzzler tax, probably administered through the local Department of Motor Vehicles. Vehicles that don't get 25 mpg would pay an additional fee, and the more gas-guzzling your vehicle, the higher the tax.

Then those who really, really need to carry tools offroad on National Forest roads would add it to the cost of doing business. Perhaps the middle class would decide that keeping the gas-guzzler just cost too much and would acquire a more fuel-efficient car.

A wag might suggest that Big Oil looked at the amount of gas tax being paid in the EU countries, and decided that it would be better in their pockets than the governments.

Since that tax money would go to infrastructure, and maintaining roads, bridges, etc., the same wag might suggest that the declining quality of US roads is the raison d etre for the 'need' to drive a SUV.

Has anyone asked the question about oil prices and the US election? (sorry, I have not read this whole blog).

Who wins with higher gas prices?

Do the Republicans win? If the US controls the Irag and area oil fields does that give them an advantage....keeping oil prices down?

Its an angle...one that the elephant party might use to their advantage.

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