Understanding Oil Subsidies

Being a big company with big profits does not make that company unethical. Inserting a portion of those profits into the political system to reap the benefits of government force through crony capitalism does make a company unethical. Purely capitalist companies could not suppress an invention or competitor that threatens their profits because they could not use government police or agencies to steal it, they could not use government courts to issue gag orders, they could not use government subsidies to keep their “shelf prices” artificially low, and could not use government regulations to shut down their competitors.

Oil companies are a major recipient of subsidies, though we must define what we mean by subsidies. When I mention subsidies, I am talking about government handing out tax dollars to corporations, not tax breaks. The tax system should never have been structured as it is currently, and almost all tax breaks in my opinion are good (as long as they are applied equally, otherwise this would be another example of crony capitalism, disadvantaging a competitor that does not receive the tax break). Tax breaks keep jobs in the U.S., they keep dollars in individuals’ and companies’ pockets, they give the government less money, and therefore less power. But taking dollars collected through taxes, and handing them back to industries does not help us, unless you look only at one particular segment of the economy, or one particular business, or one particular individual.

So only a fraction of the reported “subsidies” for oil companies would qualify as a crony capitalist subsidy, because letting people or companies keep their own money is not the same as handing out tax dollars paid by others. Still, these handouts or corporate welfare need to be eliminated in order for our economy to be organized more effectively. Yes, the shelf price of oil might go up without subsidies, but if those dollars were never collected from taxpayers in the first place, this would not be a problem. Many liberals ironically support oil subsidies in the form of heating assistance to the poor, but this also increases the profits of the oil industry and decreases the shelf price of oil. The lower the price of oil, the fewer people will opt for using alternative energy like wind and solar power, which is what makes the liberals’ support of these subsidies ironic given their environmental agenda.

Now I must admit that I was slightly misinformed about the nature of oil subsidies. I thought most of these subsidies were payments from the government to the oil industry, when in reality these direct payments are a small percentage of overall subsidies—though they should still be eliminated. Most of the “subsidies” people refer to in the “$4 billion annually to oil companies” figure are tax breaks, and heating assistance to the poor. But still, this puts companies on an uneven playing field.

So how do we even the playing field? We eliminate corporate taxes for every industry, and eliminate subsidies for every industry. This means that no U.S. company would pay any taxes, and therefore the tax code could not be used as a bludgeoning tool to kill certain corporations, or keep others afloat. Likewise no U.S. company would receive money collected from other taxpayers. Since this would appear unfair to individuals, we should also eliminate the income tax by repealing the 16th amendment, and only after it is repealed, replace it with a flat national sales tax.

This way operating a business in America is not discouraged through taxes, nor is earning an income in America. Spending it is true, would be discouraged in this scenario, but people cannot stop spending the way, say, a person who already has a fortune could stop earning. And this flat tax would also hit biggest spenders the most, but that decision would be in the hands of the individual, not the IRS who currently hits the biggest earners the most. America would also save money, having to spend fewer dollars collecting taxes.

But since this would take control away from the government and politicians, you can bet it won’t happen anytime soon, especially since the media would assist the crony capitalists as portraying a flat tax as hurting the poor, and portraying no corporate taxes as rewarding the rich. Shelf prices of many goods even after the flat tax is applied would actually stay the same as they are now, since corporations currently pass off their tax bills to consumers in the form of higher prices. But as it remains politicians and government policy are just helping to usher in the days of declining American production, while keeping themselves rich and powerful through crony capitalism.

4 thoughts on “Understanding Oil Subsidies

  1. Corporations CAN’T pay taxes. To a corporation a tax is just another cost. It must be built in to the price of the product, just like the cost of raw material or energy. The tax is passed down the line until it is paid by individuals who produce at least as much as they consume. Taxes on businesses are just a clever way of hiding the REAL tax bill from the citizens.

    • Exactly, thats why its just silly to have any corporate taxes, but in an environment where people get elected by exploiting jelousy of “the rich” thats what we ger.

  2. Pingback: America’s Economic Downfall: Abandoning the Free Market | Vigilant Vote

  3. Pingback: America’s Economic Downfall: Abandoning the Free Market | Joe Jarvis

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