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Politics : Politics of Energy
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To: Road Walker who wrote (24859)1/16/2011 11:28:57 AM
From: Alastair McIntosh1 Recommendation  Read Replies (1) of 86352
 
I replied to this line in your post 24832:

Most are in the form of tax benefits, such as the deduction for “intangible drilling costs” (labor, repairs, hauling, you name it) in oil exploration—a notoriously abused provision of the tax code.

To put these costs in perspective, suppose that Company A has Intangible Drilling Costs of $1,000,000. Suppose that Company A decides to take this expense in year 1 rather that spread the cost over 5 years. What is the cost to the taxpayer if the drilling company has a marginal tax rate of 40% and government borrowing costs 4%.

For extra marks estimate the benefit to the taxpayer if several extra jobs and a producing oil well are created producing addition tax revenues and reducing imported oil.
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