Friday, July 28, 2006
Take My Profits, Please
I was listening a debate to the news on CBS this morning. The topic was a proposed bill that would enstate a 100% tax on "excess" profits of oil companies. The Congressman sponsoring the bill quoted oil company profit figures such as thirty billion dollars a year and 1300 dollars per minute. Mostly he just invoked the pain of the people paying peak prices at the pump (nice alliteration, eh?). The expert on the other side of the table stated that the profits are at an 8% level - around the industrial average. He also reminded us that this happened in the early 80s and the result was increased gas prices because of production cuts. Of course our frien(D) replied by repeating himself instead of addressing the points made by his opponent. He went a step further by saying we should invest the revenue gained by the 100% execss profit tax in more government programs. Now I'm feeling the pain at the pump with my 15 mile per gallon pickup, but making average profits doesn't sound Sean Penn corporation evil. Our frien(D)s always remind us to learn from history, so why would we repeat this mistake? How does it help us to have the government take legimately earned, average profits to make an already swollen federal government bigger? What do you think?
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4 comments:
If oil companies have to shoulder the burden of a buyers market in petrol (like when prices were sub-$1.50 gal), but don't get to reap the reward in a sellers market, it means the rate of return that they make on invested capital will be sub-standard. The result? Oil companies will prefer to return profits to shareholders as dividends rather than invest them in new production capacity. In other words, a "penalty" tax on excess earnings is part of the energy supply problem, not part of the solution.
It's the typical liberal attitude of ignoring empirical evidence in favor of unproven or disproven idealistic theory.
Even "idealistic" is a bit generous. They're really pushing a punitive and base philosophy of "hate those who succeed if it makes you feel better about yourself."
Government policy on this issue should be simple: no subsidies for oil companies in bad times, no penalty taxes in good times. Let them sink or swim as a business on their own. Only in an extreme circumstance, where a national crisis was imminent due to supply interruptions, should the government interfere.
The problem with the government's policies is that they've been one-sided: subsidies in bad times, but no payback in good times. Eliminate subsidies, and then there's no reason to justify windfall profit taxes (which are a horrendous idea) in good times.