President Obama and Senate Democrats need to take Lemonade Economics 101.
Tell a ten-year-old that the federal government is going to make him pay 25 cents for every glass of lemonade he sells at his corner stand, and he will say he’ll have to charge an extra quarter per serving – or simply close up shop. He certainly won’t say he’ll lower his prices.
But President Obama wants us to think he can compel oil companies to lower the skyrocketing pump price of gasoline, by eliminating business tax deductions for certain major companies, and raising their cost of doing business by what he admits would be $4 billion a year.
In fact, regular gasoline averaged $1.85 per gallon when Mr. Obama took office. It is now $4.20 a gallon in much of the Washington, DC area, over $4.00 in many regions, and heading north as summer approaches. The impact on commuters, family budgets, vacation plans, and shipping food and other products has been horrendous, and is getting worse.
In reality, oil companies don’t get subsidies. They get tax deductions for exploration, drilling, refining and other business expenses. Eliminating those deductions is effectively a tax hike, and the companies will have to pass those tax hikes on to their customers – further increasing pump prices.
And yet Senate Democrats recently offered an amendment that would eliminate various tax deductions for five major oil companies, turn the supposed savings into subsidies for wind turbine, solar panel and electric car makers – and use any leftover crumbs to “pay down” our skyrocketing budget deficit.
The ploy needed 60 votes – but got only 51, despite the President’s vocal support. “Members of Congress,” he said, “can stand with big oil companies, or with the American people.”
However, the American people are no longer buying the partisan rhetoric.
They increasingly understand that new taxes and restrictions on oil companies are not in their best interest. In fact, a recent Harris Interactive poll found that over 80% of US voters support increased domestic oil and gas production, to create and preserve jobs, lower pump prices and increase government revenues.
They understand that only 12% of what they pay for gasoline goes to oil companies for refining, marketing and distribution. Another 12% is state and federal taxes. Fully 76% is determined by world crude oil prices – and thus by global supply and demand, and confidence or fear about world events.
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