Saturday, May 03, 2008

Who Is Making Money On High Fuel Costs?

It would seem that Hillary Clinton let the cat out of the bag by trying to get Congress to pass a fuel tax holiday. While the margin of profit that oil companies make has been pretty consistent at around 8%. Granted that's better than some companies, but much less than say, Google, which had a 25% profit. To quote from CNN-which is not usually an apologist for big oil companies-

"...Even though many oil companies are reporting record profits, many people forget just how expensive it is for energy companies to engage in the oil business.

The average net profit margin for the S&P Energy sector, according to figures from Thomson Baseline, is 9.7%. The average for the S&P 500 is 8.5%. So yes, energy companies are more profitable than many others...but not by an inordinate amount.

Google, for example, reported a net profit margin of 25% in its most recent quarter. Should we have an online advertising windfall profit tax?..."

CNN Money April 29, 2008

So exactly which entities have the most to lose if gas taxes are cut? Not the oil companies, their taxes are paid before it hits the pump. But local taxing umbrellas such as counties, states and even the federal government have a great deal to lose if such a tax holiday were passed. The Obama camp is trying to rally union opposition by citing the possibility of losing construction jobs. But then again, is this real shrinkage of the domestic job market, or will it give construction companies the incentive to stop hiring people who are not here legally? And when it comes to tax dollars going into Washington D.C. , Texans are only getting about seventy five cents or so for every dollar we send. So where's the rest of the money? We could go into the scenario from "It's a Wonderful Life" where the function of the savings and loan is explained, but the simply matter is that the money Texans don't get back in the form of projects is political payola for things like ethanol support subsidies, pet projects and celebrity endorsed programs which due to their cost only help the already wealthy. In short, while there's a noticeable reluctance to address the issue, the federal government, state governments and local towns and cities are reaping a bountiful harvest of sales taxes that become exponentially higher when they are based on per dollar sales. Everyone wins, except the consumer. Maybe someone should read them the story about the Goose that Laid the Golden Egg before all of our gooses are cooked.

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