“Obviously the government loses any royalties if those wells are on government owned land.
Given the very high price of pumping US oil taking away normal tax deductions for costs incurred in producing that oil will result in a rather large scale shutdown of American wells.”
I know that I would have to go on welfare because all of my income except SS comes from wells that would have to be shut in and I am to damn old to go back to work.
Also state governments receive revenue even if the well is not on government land. In Oklahoma we pay a gross production tax of 7.2 % off the top. That is even if the well is operated at a loss, we still have to pay 7.2 % of the gross revenue. I don’t know many other businesses that have such a tax burden.
With capital gains, you pay taxes every time you win and get to write off $3,000 of losses if you have other income (like from interest).
So over 3 years if you make $250K and lose $4 million, you pay about $75K in taxes on a $3.5 million loss.
Here are the real numbers......
Big Oil and Tax Breaks
By Randall Hoven
To hear the president and Democrats talk, you’d think that Big Oil was sucking the Treasury dry with huge subsidies. Almost a year ago I wrote about the federal government’s “subsidies” to Big Oil. I said then, “They are all tax ‘breaks’... about $4.3 billion per year — about 0.2% of this year’s deficit and enough to fund about 10 hours of current US government spending.”
I was wrong. The tax breaks for all fossil fuels was not $4.3B in 2011. It was only $2.5B — about 0.19% of that year’s deficit, and enough to fund only six hours of U.S. government spending. The source for such heresy? The Congressional Budget Office.
Just to be clear, that $2.5B was not just for Big Oil, but also for Big Coal and Big Gas: all fossil fuels. Here, more exactly, are those subsidies, in the CBO’s words.
• “Expensing of exploration and development costs for oil and natural gas.” ($0.8B)
• “Option to expense 50% of qualified property used to refine liquid fuels.” ($0.8B)
• “Option to expense investment costs on the basis of gross income rather than on production.” ($0.9B)