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ELIZABETH TAYLOR AND DEPLETION ALLOWANCES (PART II)

October 28, 2014

 

ELIZABETH TAYLOR AND DEPLETION ALLOWANCES (PART II)

Harry S. Truman had it right when he said in 1950 that “I know of no loophole in the tax laws so inequitable as the excessive depletion exemptions now enjoyed by oil and mining interests. . . This is a shocking example of how present tax loopholes permit a few to gain enormous wealth without paying their fair share of the taxes.” Even Ronald Reagan (in 1985) said: “The oil and gas industry will be asked to pick up a larger share of the national tax burden. . . By eliminating this special preference, we’ll go a long way toward ensuring that those that earn their wealth in the oil industry will be subject to the same taxes as the rest of us. This is only fair.”

Both were right, but “fair” is not within the industry’s lexicon in its oblivious drive for profit, and as Lee Raymond, former Exxon CEO said: “Presidents come and go; Exxon doesn’t come and go.” (Translation: The tail is wagging the dog, and should. We are bigger than the country that nurtures us. Get out of the way. Regulation is socialism. Taxes are always too high and tax credits and deductions too low. You taxpayers pipe down and pay up. We represent the best of free enterprise, so the world owes us a living etc.) The list of inferences is long and limited only by the imagination of MBA corporate flacks.

The oil industry complains that it is unjustly accused and insists that it doesn’t receive any handouts. The industry is technically correct in that we don’t actually give them much money; we are just losing money we could otherwise be collecting from them. The industry does not have to convince lawmakers to do something; it has to convince them to do nothing. The status quo is, after all, both comfortable and profitable from their stance. They already have their goodies buried in the weeds of the internal revenue code and the process becomes one of tax policy, and, as Autumn Hanna, an analyst at Taxpayers for Common Sense asks, “Who’s excited and interested in tax policy?”

There is also the problem that few politicians want to untangle the wonkiness of decades-old-tax loopholes. Why bother? How many angry letters do senators get from their constituents demanding an end to the “depletion allowance” versus those they get on climate control, excessive spending, abortion and other hot-button topics? Just how sexy and passionate can a mind-numbing sub-committee discussion of tax policy get versus a woman’s right to choose and all the screamers outside abortion clinics?

The media are complicit. “Face the Nation” and other such shows will not be calling senators for a Sunday morning interview on some relatively obscure tax provision what with Ebola and murdered abortion doctors to discuss. After all, the networks have to go for the ratings to sell cars and pills, and their advertising executives rightly conclude that few if any viewers are interested in arcane tax matters enough to tune in, even though we taxpayers are being fleeced out of millions DAILY in welfare for Big Oil and drillers.

So we taxpayers continue to bleed by billions annually to oil company welfare, nobody seems to care, and if it’s not abortion, then it’s ISIS or some other crisis du jour. There’s always something to grab the spotlight and shine it away from legislative housekeeping, housekeeping neglected by a Congress that would rather fight than legislate. So, quietly, we taxpayers bleed in big numbers for oil, and have since 1916 in a welfare show predating food stamps, Social Security and individual welfare for people by many years – all programs Big Oil’s executives now have the colossal gall to criticize as “socialism!” What?

In the movie Giant, there is a line from a Texas senator which describes the depletion allowance as “the best thing to hit Texas since we whipped Geronimo.” Elizabeth Taylor quipped as follows: “How about an exemption for depreciation of first-class brains, Senator.” The screenwriter for the movie, Ivan Moffat, said that “oil interests” pressured studio head Jack Warner to kill Taylor’s line, and he did.

The “killed” quip nevertheless tells us that Elizabeth Taylor with a penetrating insight recognized that people depreciate, too,  what with age and infirmity, and asks inferentially why human beings are not allowed a “depletion allowance” since they deplete/depreciate just as certainly as the contents of oil wells do. Ronald Reagan, then a liberal Democrat and president of the Screen Actors Guild, testified before a Congressional committee in 1958 in plainer language. Noting the similarity between actors and oil wells, he testified: “We feel we are about as short-lived as an oil well and twice as pretty. Yet we have no depletion allowance to compensate for the diminishing market value.”

It is not only the “looks” of movie stars whose market value is reduced with age and infirmity. All of us in one way or another suffer depreciation of skillsets, manual dexterity, increasing likelihood of poorer health etc. as the clock ticks on. Elizabeth and the Reagan of old were right. If an oil well can be said to deplete as it is emptied (or even if it isn’t) to gain a tax advantage, then why can’t we taxpaying humans gain a tax advantage to compensate for our “depreciation?”

Should public policy favor the tax treatment of oil wells over the tax treatment of American taxpayers who are footing the bill while their minds and bodies necessarily “depreciate?” Elizabeth Taylor and the Reagan of old would say no, that “what’s sauce for the goose is sauce for the gander” as an expression of fair treatment and our Constitutional right to Equal Protection of the Laws. I agree.   GERALD   E

 

 

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