Saturday, August 14, 2010

OOOPS looks like The Big O messed up

It seems like a miracle that our leader was able to convince BP to establish a $20 billion escrow fund to compensate those hurt by the ongoing oil plume in the Gulf of Mexico .
After all, he had no constitutional power to force them to do so.
Let us take a closer look at the effect on BP’s 2010 finances:
1. BP will establish a $20 billion fund, but will pay only $7 billion into it during 2010.
2. BP is a British corporation, but has a very large operating entity in the US .
3. By Generally Accepted Accounting Principles (GAAP), BP must book the entire $20 billion expense in the year accrued, i.e., year the liability is incurred. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.
4. Our anointed leader also convinced this massive corporation to show their concern for the “small people” by withholding dividends to their shareholders for the last 3 quarters of 2010. This reduces their outward cash flow by about $7.5 billion, including approximately 40% of that amount to US citizens. Assuming that the Bush tax cuts will survive through the end of 2010, the US Treasury will lose another $450million in taxes on that amount. We won’t even discuss the effect on the US economy.
Let us put the results into a table easily understood by the "small" people:
BP Cash Flow:
· Escrow funding ($7 billion)
· Dividend saving $7.5 billion
· Tax savings $7 billion
· Net favorable cash flow for 2010 to BP : $7.5 billion
US Treasury Tax Receipts/Reductions:
· BP Corporate income tax (-$7.5 billion)
· BP Shareholders (-$0.45 billion)
· Net unfavorable tax receipts ($7.95 billion)
I guess we really should expect this. After all, our anointed leader is the most inexperienced man in any room he enters.
· BP Corporate Bean Counters - 1
· Washington Tax Smart Guys - 0
· American People - We Get BP (Bean Poop)
This isn't so hard to understand - BP made their largest political contributions to Obama's campaign. Obama plays politics acting tough on BP. We pay.
Frankly, I admire BP for their deal making ability. They must have brought their accountants to the table. After all, BP is not a fly by night operation and Obama thought he and his minimal business experience tax people and accountants could take on BP.


Baxter said...

Al - your piece was penned by T Paine, a rather dim witted Tea Partier (sorry for the redundance).

We should all be happy that our president used the bully pulpit to extract the $20B escrow account. Victims won't need to wait 20 years, which was the case with many damaged by the Exxon Valdez.

Mr Paine assumes an effective tax rate of 35%, which is about three times what corporations actually pay. So - the true cost to the Treasury will be closer to $2B.

Using Paine's math, the cost to the taxpayers in years two and three will be zero, even as BP continues to shell out $7B per year and victims are thus made whole.

The dividend was not paid for two reasons: 1> It would look bad. 2> The company needs to accumulate cash to pay the $20B as well as any additional obligations related to the spill.

America is wide awake. Meanwhile, Mr Paine needs to go back and bone up on basic math.

riegels rant said...

I guess we will just have to wait and see won't we...I will go with what is written, knowing your man he is in bed with someone someplace on this deal...time will tell...hey how did you like to pesky videos I sent to you on how O will change things when he is in the WH...YEA Right...see ya in going to Becks 8/28 gathering in should you might learn something

Baxter said...

Conspiracy theories are borne of ignorance, Al.

My writing is far more authoritative than the fellow that you cut n' paste. If you look at his Blogspot, he is one of the lunatic fringe. Me - I'm your voice of reason. Deep down, you know I'm right.