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May 7, 2008
Why Not Try Stalinism?
Rep. Paul Kanjorski (D-PA) knows just how to lower gas prices without increasing supply or strengthening the dollar: expropriate "windfall profits" and then impose a Soviet-style government commission to regulate how much profit oil companies can make. In case the absurdity of this proposal isn't self-evident, Colin McNickle helps explain:
First, the more you tax something, the less you get of it. In this case, that means less domestically discovered and procured oil and refined gasoline and more foreign oil. Right-wing theory? Hardly. Review the data from the 1980s, the last time "windfall" oil profits were taxed:
Domestic production dropped between 3 percent and 6 percent and dependence on foreign oil increased between 8 percent and 16 percent, reported the Congressional Research Service. […]
Second, an analysis by the Tax Foundation (in 2005) found that, since 1977, governments collected tax revenues "more than twice the amount of domestic profits earned by major U.S. oil companies." Of course, Congressman Kanjorski's "windfall profits" levy would not apply to the only true "gouger" in this equation — state and federal governments.
Third, there are many other industries whose profits per dollar of sales equal or exceed those of Big Oil; they're not targeted by Kanjorksi. Apparently, "windfall" is in the blind eye of the tax 'em beholder, usually holding a lifetime membership in The Club for the Economic Ignorami.
Fourth, this concept of a "Reasonable Profits Board" is an incredibly slippery slope that, when applied by slippery politicos, could leave no business standing. Today, Big Oil; tomorrow, Big Software. Why risk any investment when the extent of your rewards is either predetermined by government or trampled by government when your enterprise is "too successful"?
The solution, as usual, is for the government to get out of the way:
Greater domestic drilling and refining capacity would go a long way to start fixing the problem. It also would send a strong message abroad and bolster the weak dollar, said to account for about $40 of each barrel of crude.
Once again the wisdom of Ronaldus Maximus is confirmed:
In the present crisis, government is not the solution to our problem; government is the problem.
On a tip from V the K.
Posted by Van Helsing at May 7, 2008 7:31 AM
Comments
The only time the left acknowledges that taxation discourages some activity is when they are talking about taxing cigarettes, or some other activity the state has deemed inappropriate.
Don't count on them fessing up to the windfall profits tax causing a decrease in oil supply, and an increase in oil/gas prices. In fact, they will claim the oil companies are sticking it to us, and then begin suggesting the government take over control of the oil companies.
Yeah, that will solve all our problems.
Posted by: Lyle at May 7, 2008 9:08 AM
Time for idiots like Paul, here, to go! Elect conservatives, or see the country go right down the tubes (sooner rather than later, with dolts like this one in charge of our economy).
Posted by: jc14 at May 8, 2008 11:45 AM
