Here's an analysis developed by a friend and sent to the editors of several eastern seaboard papers. Looks okay to me. What’s your view?
It seems like a miracle that our beloved leader was able to convince BP to establish a $20 billion slush fund (oops, escrow) 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.
But, let us take a closer look at the effect on BP’s 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 (GAP), BP must book the entire $20 billion expense in the year accrued. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.
4. Our dear 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 2010, the US Treasury will lose another $450 million 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:
O Escrow funding ($7 billion)
o Dividend saving $7.5 billion
o Tax savings $7 billion
o Net favorable cash flow : $7.5 billion
· US Treasury Tax Receipts:
o BP Corporate income tax ($7.5 billion)
o BP Shareholders ($0.45 billion)
o Net unfavorable tax receipts ($7.95 billion)
I guess we really should expect this. After all, our dear leader is the most inexperienced man in any room he walks into. Question: Did the US Taxpayers just fund the first 1/3 of the BP Escrow commitment?