Windfall Profits
A bad idea resurfaces…
Senators Byron Dorgan and others, including Hillary Clinton, have begun the effort to resurrect the failed policy of ‘Windfall Profits Tax’ from the ash heap of history. Much of our problems today related to limited supply of gasoline, after the mess left in the wake of Hurricanes Katrina and Rita, could be traced back to the failed idea of the Carter Administration of ‘Windfall Profits Tax’. The media and political assault upon ‘Big Oil’ stems from the perception that, for example, Exxon/Mobil’s 9.9 billion dollar third quarter profit is gross and proof of gouging by the Oil Company. Put into perspective you might begin to agree that gouging is indeed going on, but blame may rest elsewhere.
In the case of Exxon/Mobil it is important to see the whole picture before we call for a 50% tax on what the government sees as excessive profits. Most important to understand, in this instance, is that the 9.9 billion in profits only represent 9.9% of revenue for Exxon/Mobil.
First, consider that the 9.9 billion in 3rd quarter profits will already be taxed at 35%. We the people in the form of the government are already getting 35% of the profits from Exxon/Mobil. Government already gets a healthy portion of the profits from ‘Big Oil’(more than 3 billion).
Second, possibly the most interesting and telling fact is that we, in our roll as the Tax Man, get on average 46 cents on every gallon sold while ‘Big Oil’ only gets 10 cents. Not only does government get on average more than 4 times as much, in taxes, as ‘Big Oil’ gets in profits, but the government assumes no risk.
State and Federal Government is the entity that makes the most off of a gallon of gas, yet it is government who is trying to ask for more…and who is the greedy one?
Thirdly, when President Carter pushed for and passed the ‘Windfall Profit Tax’ it had the net affect of creating more dependence on foreign oil than less. Domestic production declined by 1.5 million barrels a day. When companies have less to spend on exploration, they buy more from overseas suppliers at a lower cost. Ultimately, the last phase of WPT resulted in greater dependence upon foreign suppliers and less domestic production, exactly the opposite of what most of us want from the industry.
Those in favor of the WPT will argue that any profits put back into exploration or refineries, conveniently forget they are the same folks limiting the exploration and refinery investments via environmental laws and such. What ‘Big Oil’ has to keep in mind is return on investment (ROI), but the more favorable solutions to exploration and new refineries are politically unacceptable to those proposing a ‘Windfall Profits Tax’.
Finally, if you are upset about the gross profits of ‘Big Oil’ you should be more than 4 times as angry about the gross profits gained by Government on each gallon of gasoline sold. Congress, both Republican and Democrat alike, recently passed the Transportation Bill that has more ‘pork’ than a Jimmy Dean factory. The truly greedy are those who spend our tax dollars, they can never do with less!
Senators Byron Dorgan and others, including Hillary Clinton, have begun the effort to resurrect the failed policy of ‘Windfall Profits Tax’ from the ash heap of history. Much of our problems today related to limited supply of gasoline, after the mess left in the wake of Hurricanes Katrina and Rita, could be traced back to the failed idea of the Carter Administration of ‘Windfall Profits Tax’. The media and political assault upon ‘Big Oil’ stems from the perception that, for example, Exxon/Mobil’s 9.9 billion dollar third quarter profit is gross and proof of gouging by the Oil Company. Put into perspective you might begin to agree that gouging is indeed going on, but blame may rest elsewhere.
In the case of Exxon/Mobil it is important to see the whole picture before we call for a 50% tax on what the government sees as excessive profits. Most important to understand, in this instance, is that the 9.9 billion in profits only represent 9.9% of revenue for Exxon/Mobil.
First, consider that the 9.9 billion in 3rd quarter profits will already be taxed at 35%. We the people in the form of the government are already getting 35% of the profits from Exxon/Mobil. Government already gets a healthy portion of the profits from ‘Big Oil’(more than 3 billion).
Second, possibly the most interesting and telling fact is that we, in our roll as the Tax Man, get on average 46 cents on every gallon sold while ‘Big Oil’ only gets 10 cents. Not only does government get on average more than 4 times as much, in taxes, as ‘Big Oil’ gets in profits, but the government assumes no risk.
State and Federal Government is the entity that makes the most off of a gallon of gas, yet it is government who is trying to ask for more…and who is the greedy one?
Thirdly, when President Carter pushed for and passed the ‘Windfall Profit Tax’ it had the net affect of creating more dependence on foreign oil than less. Domestic production declined by 1.5 million barrels a day. When companies have less to spend on exploration, they buy more from overseas suppliers at a lower cost. Ultimately, the last phase of WPT resulted in greater dependence upon foreign suppliers and less domestic production, exactly the opposite of what most of us want from the industry.
Those in favor of the WPT will argue that any profits put back into exploration or refineries, conveniently forget they are the same folks limiting the exploration and refinery investments via environmental laws and such. What ‘Big Oil’ has to keep in mind is return on investment (ROI), but the more favorable solutions to exploration and new refineries are politically unacceptable to those proposing a ‘Windfall Profits Tax’.
Finally, if you are upset about the gross profits of ‘Big Oil’ you should be more than 4 times as angry about the gross profits gained by Government on each gallon of gasoline sold. Congress, both Republican and Democrat alike, recently passed the Transportation Bill that has more ‘pork’ than a Jimmy Dean factory. The truly greedy are those who spend our tax dollars, they can never do with less!
posted by Tom Gaitens at 12:11 PM
0 Comments:
Post a Comment
<< Home