Big Oil Gets a Windfall: No Sales Taxes

I don’t know how this got past me, but a couple of weeks ago, oil companies operating in the state of Texas were told that they don’t have to pay sales taxes for oil field production equipment.

Oil companies, currently making money hand over fist, don’t have to pay sales tax like you do. Sales tax on equipment to produce petroleum.

And ironically it was District Judge John Dietz, who is famous for his ruling on the constitutionality of state school funding who made this ruling last April 11^th. State sales taxes are a big part of how school districts get their funds from the state, and Dietz’s ruling would not only put the state on the hook to refund $2 billion in sales taxes already collected, but it would deny the state revenues amounting to $2.4 billion in the next 5 years.

More recently it came as some surprise to the judge that some damnfool judge in Texas ruled to deny his state billions of dollars in revenue, only to discover that the damnfool judge was none other than himself.

From the Austin American-Statesman:

“On Thursday, the ever-colorful Dietz recalled that he had been reading The Wall Street Journal over a breakfast of oat gruel when he saw that some Texas judge had recently overturned 50 years of tax law and crippled the state budget.”

"‘What fool did that?’ Dietz said he wondered as he read the story. ‘I'll be damned; it's me.’"

It seems that Judge Dietz was persuaded by an oil company lawyer’s specious argument that produced crude oil was a manufacturing process. In Texas, buying equipment for manufacturing is tax-free. More of that attracting industry to Texas policy that robs its citizens and schoolchildren of much-needed revenues. It is a manufacturing process, they argued, because in the act of raising oil from the reservoir where it exists at much higher pressure than we have here on Earth’s surface, the pressure decrease allows some gas to come out of solution.

Natural gas is “manufactured” because it follows Boyle’s Law.

In truth, the petroleum is fairly useless if it is kept at those high pressures because it needs to stay in the ground so the pressure can be maintained. In the act of raising it to make it useful, natural gas is produced because of the laws of physics.

Judge Dietz bought a specious argument manufactured by unscrupulous lawyers.

This is why science needs to be taught at law school.

So as a result, Dietz is going to have a “stinkin’ rehearing.” Now I find it interesting that the reason Dietz came up with second thoughts wasn’t because he listened to flawed and unscientific logic, it was because it would take too big of a bite out of the state’s revenues.

It’s not so much about what is right as it is about what’s the bill?

Well That’s a Relief, Texas Can Continue to Inadequately Raise Revenue

Late yesterday justices of the Texas Supreme Court, Republicans all, ruled that the business franchise tax was not unconstitutional as alleged by plaintiff Allcat Claims Service LP.

This was a lawsuit that was filed last year that claimed that the 2005 revamp of the Texas tax collection system, a totally inadequate one given the basic necessities of what it must pay for, was unconstitutional because of the 1993 Bullock Amendment, passed by the legislature and agreed upon by Texas voters, that forbade the establishment of an income tax.

Yes, voters voted not to have state income taxes. Do tell.

The court found that this was not a tax on the income of real flesh and blood people, but a tax on an entity.

So we can all breathe a sigh of relief that one of the state’s major sources of revenue, a totally inadequate source of revenue given the current biennial budget shortfall of $28 billion, will not be squished like a cockroach in a corner.

They can continue to raise revenue from businesses, revenue that doesn’t cover costs.

Frankly, I was routing for an overturn of the business tax, not because I want Texas to face a budget crisis like it has never faced before, but because I wanted the legislature to be forced into a corner and finally pass legislation that would adequately fund public school education and Medicaid.

But that’s our Republican Supreme Court, enabling the cutters of government services one more time.

Revenue, Debt Ceiling and Coming to the Table

I’m starting to see some give on the GOP side over raising taxes by closing loopholes (which is not, by definition, raising taxes). Texas’ Junior Senator John Cornyn was on Fox News Sunday today and is reported to have said something like this, as reported in the Wall Street Journal:

“Republican Sen. John Cornyn of Texas said lawmakers should close some tax loopholes and eliminate breaks as part of a broader effort to cut rates, though he cautioned that there may not be enough time to include such changes in a budget deal now under negotiation.”

Arizona Senator John Kyl has also proposed what John McCain terms “revenue raisers” (tax loophole closures and fee increases), getting specific that they don’t want to change the tax code and raise taxes.

And Oklahoma’s Tom Coburn is infamous for his willingness to raise taxes in his effort to end the ethanol tax credit, a proposal that failed by one vote short of the 60 needed to bring the bill to the floor.

So I am wondering why this is. Why are Republicans now apparently walking back on their once hard-line position of deficit reduction by slashing spending, something that went over like a lead balloon with voters at the end of the recently completed special session of the Texas legislature?

I suspect the chorus of voices that erupted this past week claiming that Republicans are sheltering their rich friends and donors by refusing to end tax credits on corporate jets and ending the oil and gas subsidies to the richest and most lucrative corporations the world has ever known may have something to do with it.

It is after all, an obvious truth that they want to cut Medicare, the most popular government program in history, but want to leave the oil companies alone.

I think that this time, the truth hurt a little.

Now it’s time to come to the table in a serious way.