Paducah Sun Newspaper: Windfall Profits Tax A Proven Failure.
The Paducah Sun/Editorial
NONSTARTER
Windfall profits tax a proven failure
Barack Obama is young, so perhaps we can excuse his call for a windfall profits tax on oil companies as the misguided idealism of youth. He was barely out of high school when Washington first exploited America’s collective anger at oil companies to impose the windfall profits tax.
But Bruce Lunsford is old enough to remember. And know better.
Lunsford attacks Sen. Mitch McConnell in a TV ad for giving “billions in tax breaks” to Big Oil, based on McConnell’s opposition to a windfall profits tax. Using that reasoning, a thief “gives” his victim a break by letting her keep her clothes after stealing her purse and jewelry. The government is not “giving” oil companies anything. Those companies ultimately pay more in federal taxes than they make in profits.
We don’t have to look back very far to see how well a windfall profits tax works; the United States tried it in 1980. The public policy group Tax Analysts traced the brief, sorry history of the tax in 2005. The report is revealing.
Jimmy Carter, the preincarnate Barack Obama, was behind the tax. Naturally. Congress imposed the tax as it moved simultaneously to eliminate oil price controls. Carter was alarmed at the prospect of American companies making more money.
Addressing the nation on television, the president warned, “Unless we tax the oil companies, they will reap huge and undeserved windfall profits.” Undeserved? Just what qualifies a politician to determine what profit level is “deserved”?
But Carter had the country’s pulse. Gas lines and apprehension about dwindling worldwide oil deposits left the public ripe for anything that appeared to address the energy crisis.
The tax was a colossal failure. The General Accounting Office called it “perhaps the largest and most complex tax ever levied on a U.S. industry.” The oil industry claimed the cost of compliance — not including the actual taxes paid — soared to between $40 and $50 million a year, a cost ultimately felt at the gas pump.
Not only did the tax dramatically increase our dependence on foreign oil by reducing domestically produced supply, it generated only a fraction of the anticipated tax revenue. By the time the tax was repealed eight years after its implementation, it had produced only $79 billion in revenue. And because the windfall profits tax was deductible on regular corporate income taxes, the net revenue was about half that.
The New York Times had endorsed the tax when Congress first considered it: “Legislators who sit by idly while oil profits soar will have to answer to the voters.” But eight years later the Times said it was “time for the windfall tax to fall,” adding, “It seems almost quaint now.”
Tax Analysts concluded: “Events had overtaken the levy, as so often happens with narrow taxes designed to deal with transient phenomena.” Transient phenomena — sounds strangely familiar.
The windfall profits tax was a bad idea in 1980. It’s a worse idea now.
But that doesn’t keep Barack Obama and Bruce Lunsford (along with Democratic office seekers across the country) from again attempting to exploit pain at the pump to propose another windfall profits tax.
The candidates are showing great discipline by sticking to their energy policy talking points even when, as in the case of Lunsford, they know it’s a nonstarter.
The tax is not likely to ever come to fruition. The proposal is not offered as serious energy policy, but temporary election strategy. The message: Energy prices are too high. Big Oil is to blame. And we’re here to the rescue — with a plan to confiscate those obscene profits and give them to households struggling to pay their bills.
If an Obama policy advisor takes the time to give the candidate a history lesson, he’ll abandon the windfall profits tax before his inauguration. At least we hope so. If he knows what happened and still favors the tax, we’re in for a wild ride.
And as for Bruce Lunsford, well, he’s counting on voters having a short memory.
Editor's comment: I AGREE that the so called "windfall profits" tax (whatever that means) is a TERRIBLE idea.
Enough said.
NONSTARTER
Windfall profits tax a proven failure
Barack Obama is young, so perhaps we can excuse his call for a windfall profits tax on oil companies as the misguided idealism of youth. He was barely out of high school when Washington first exploited America’s collective anger at oil companies to impose the windfall profits tax.
But Bruce Lunsford is old enough to remember. And know better.
Lunsford attacks Sen. Mitch McConnell in a TV ad for giving “billions in tax breaks” to Big Oil, based on McConnell’s opposition to a windfall profits tax. Using that reasoning, a thief “gives” his victim a break by letting her keep her clothes after stealing her purse and jewelry. The government is not “giving” oil companies anything. Those companies ultimately pay more in federal taxes than they make in profits.
We don’t have to look back very far to see how well a windfall profits tax works; the United States tried it in 1980. The public policy group Tax Analysts traced the brief, sorry history of the tax in 2005. The report is revealing.
Jimmy Carter, the preincarnate Barack Obama, was behind the tax. Naturally. Congress imposed the tax as it moved simultaneously to eliminate oil price controls. Carter was alarmed at the prospect of American companies making more money.
Addressing the nation on television, the president warned, “Unless we tax the oil companies, they will reap huge and undeserved windfall profits.” Undeserved? Just what qualifies a politician to determine what profit level is “deserved”?
But Carter had the country’s pulse. Gas lines and apprehension about dwindling worldwide oil deposits left the public ripe for anything that appeared to address the energy crisis.
The tax was a colossal failure. The General Accounting Office called it “perhaps the largest and most complex tax ever levied on a U.S. industry.” The oil industry claimed the cost of compliance — not including the actual taxes paid — soared to between $40 and $50 million a year, a cost ultimately felt at the gas pump.
Not only did the tax dramatically increase our dependence on foreign oil by reducing domestically produced supply, it generated only a fraction of the anticipated tax revenue. By the time the tax was repealed eight years after its implementation, it had produced only $79 billion in revenue. And because the windfall profits tax was deductible on regular corporate income taxes, the net revenue was about half that.
The New York Times had endorsed the tax when Congress first considered it: “Legislators who sit by idly while oil profits soar will have to answer to the voters.” But eight years later the Times said it was “time for the windfall tax to fall,” adding, “It seems almost quaint now.”
Tax Analysts concluded: “Events had overtaken the levy, as so often happens with narrow taxes designed to deal with transient phenomena.” Transient phenomena — sounds strangely familiar.
The windfall profits tax was a bad idea in 1980. It’s a worse idea now.
But that doesn’t keep Barack Obama and Bruce Lunsford (along with Democratic office seekers across the country) from again attempting to exploit pain at the pump to propose another windfall profits tax.
The candidates are showing great discipline by sticking to their energy policy talking points even when, as in the case of Lunsford, they know it’s a nonstarter.
The tax is not likely to ever come to fruition. The proposal is not offered as serious energy policy, but temporary election strategy. The message: Energy prices are too high. Big Oil is to blame. And we’re here to the rescue — with a plan to confiscate those obscene profits and give them to households struggling to pay their bills.
If an Obama policy advisor takes the time to give the candidate a history lesson, he’ll abandon the windfall profits tax before his inauguration. At least we hope so. If he knows what happened and still favors the tax, we’re in for a wild ride.
And as for Bruce Lunsford, well, he’s counting on voters having a short memory.
Editor's comment: I AGREE that the so called "windfall profits" tax (whatever that means) is a TERRIBLE idea.
Enough said.
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